Cost of capital : Question 1
Why should supplier credit not be considered as a source of financing like bank and other long-term debts or like equity, when calculating WACC?
Operating debts do not bear interest and accordingly, cannot be included when computing WACC. In addition, when computing WACC it is the market value that should be weighted (not the book value), and the same goes for debt. Finally, the financial structure is not determined on the whole of the balance sheet, but on the sum of equity + net debt. Operating debts are included in working capital.