A company that has both debt and equity in its capital structure will use its weighted average cost of capital (WACC) as its discount rate. Based on your understanding of the weighted average cost of capital, complete the following statements: • In general, the the risk of a firm as perceived by its existing and potential investors, the greater is the firm’s weighted average cost of capital (WACC). • The calculation of a firm’s weighted average cost of capital should be based on the after-tax cost of the dollar of financial capital raised. • It is generally believed that the proportions, or weights, used in the calculation of a firm’s weighted average cost of capital should be based on the market values of the firm’s capital sources. This is because the market value weighting system is more consistent with maximizing the value of the firm’s . True or False: Although the use of market value weights is theoretically superior to the use of book value weights in the calculation of a firm’s weighted average cost of capital (WACC), firms often use book value weights due to their relative stability compared to the daily changes in market values. True False True or False: A firm’s new investments, existing assets, and capital structure affect its overall degree of risk and, in turn, its weighted average cost of capital (WACC). True False