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    WACC - historical versus current

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    In computing the cost of capital, do we use the historical costs of existing debt and equity or the current costs as determined in the market? Why?

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    We use current costs as determined by the market.
    -cost of capital is used as a hurdle rate for selecting new projects for investment. ...

    Solution Summary

    The solution explains whether we should use the current cost of capital or the historical cost of capital when we are using the cost of capital for taking decisions.