Q. Describe Market Value Weights?
Market Value Weights: - As per market worth scheme of weighting the weights to dissimilar sources of finance are assigned on the basis of their market values.
Benefits of Market Value Weights:-
- The costs of different sources of finance are calculated using prevailing market prices. Therefore it is proper to use market value weights
- Weights assigned as-per to the market values of the sources of finance represent the true economic values of different sources of finance.
Drawbacks of Market Value Weights:-
- Market value weights mayn't be available as securities of all the companies aren't actively traded.
- It is extremely difficult to use market value weights for the reason that the market prices of securities fluctuate widely and frequently.