Question 15 Which of the following statements is correct? The main difference between the finance balance sheet and the accounting balance sheet is that the finance balance sheet is based on book values rather than market values. All the answers are correct. The proportions of debt and equity used to determine the weighted average cost of capital for a firm is based on the book value of debt and equity outstanding. If a firm is subject to income taxes, then the before-tax cost of debt for the firm will be less than the after-tax cost of debt. When the WACC is calculated, the cost of each type of financing is weighted according to the fraction of the total firm value represented by that type of financing