Ask Question
BusinessBusiness
5 December, 04:53

Why is the after-tax cost of debt the relevant cost of debt?

+1
Answers (1)
  1. 5 December, 05:35
    0
    The after tax cost of debt is the tax-adjusted interest rate on a debt that a company borrows. Unlike dividends, debt has a tax shield which lowers the percentage rate paid on the debt. When a levered firm wants to determine the appropriate discount rate for evaluating projects with similar risk as the firm, it would determine the weighted average cost of capital (WACC). In its calculation, the relevant cost of debt would be the after-tax cost of debt and not the pretax cost of debt.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Why is the after-tax cost of debt the relevant cost of debt? ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
What should you include on a resume? A) Past salary information B) Your medical history C) Reason for termination from a job D) Your career objective
Answers (1)
Caroline campbell is buying shares in a mutual fund that invests in bonds offered by foreign companies and governments. what type of mutual fund is she buying
Answers (1)
The highest possible value for the interest burden ratio is
Answers (2)
When new firms enter a perfectly competitive market, a. entering firms will earn zero economic profit upon entry into the market. b. economic profits of existing firms will continue to be zero. c.
Answers (1)
What is business administration?
Answers (1)
New Questions in Business
A corporation issued 100 shares of its $5 par value common stock in payment of a $1,800 charge from its accountant for assistance in filing its charter with the state. the entry to record this transaction will include
Answers (1)
During a certain four-year period, the consumer price index (CPI) increased by 30%, but during the next four-year period, it increased by only 10%. Which of these conditions must have existed during the second four-year period? A. Deflation B.
Answers (2)
Giving a retailer an incentive to sell your product/service is the responsibility of which of the marketing mix?
Answers (1)
Able Graphics received a $780 utility bill for the current month's electricity. It is not due until the end of the next month which is when they intend to pay it.
Answers (1)
Broker Al offers all his agents the ability to sell their own homes without any commission owed the brokerage. In what part of the work agreement might this information be located?
Answers (1)
Home » Business » Why is the after-tax cost of debt the relevant cost of debt?
Sign Up Forgot Password?