Series 79 practice questioneasyAdvanced Financial Analysis
Which component is NOT used when calculating a company’s weighted average cost of capital (WACC)?
- ACost of debt
- BCost of equity
- CTax rate
- DCost of inventory✓ Correct answer
Explanation
Why D — Cost of inventory
WACC includes the cost of debt, cost of equity, and the tax rate, but not the cost of inventory. Including irrelevant costs can lead to errors in valuation analysis.
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