Series 79 practice questionmediumDCF - Choosing Discount Rate
Which of the following is LEAST likely to be considered in estimating a company's weighted average cost of capital (WACC)?
- ACompany's tax rate
- BProportion of equity and debt in capital structure
- CExpected inflation rate✓ Correct answer
- DCost of preferred stock, if any
Explanation
Why C — Expected inflation rate
Expected inflation impacts discount rates indirectly, but WACC is computed based on tax rate, capital structure, and component costs. Inflation is not explicitly an input.
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