Series 79 practice questionmediumAdvanced Financial Analysis
Which component is NOT typically included in the calculation of a company’s weighted average cost of capital (WACC)?
- ACost of debt
- BInterest income from excess cash✓ Correct answer
- CCost of preferred stock
- DCost of equity
Explanation
Why B — Interest income from excess cash
WACC focuses on the costs of raising capital (debt, equity, and preferred stock), not interest income from cash holdings. Including interest income would understate the true cost of capital.
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