When calculating the afterminustax weighted average cost of capital (WACC), which of the following costs is adjusted for taxes in the equation? A. The before-tax cost of preferred stock

B. The before-tax cost of equity

C. The after-tax cost of debt

D. The before-tax cost of debt

Question

Business

Taniya Rich

6 November, 00:07

When calculating the afterminustax weighted average cost of capital (WACC), which of the following costs is adjusted for taxes in the equation? A. The before-tax cost of preferred stock

B. The before-tax cost of equity

C. The after-tax cost of debt

D. The before-tax cost of debt

+3

Answers (1)

Know the Answer?

Tommy Simon · Answer 1

The before-tax cost of debt is adjusted for tax in the computation of weighted average cost of capital.

The correct answer is D

Explanation:

In the calculation of weighted average cost of capital, the before tax cost of debt is adjusted for tax so as to obtain the after-tax cost of debt. Cost of equity and cost of preferred stocks will not be adjusted for tax.

When calculating the afterminustax weighted average cost of capital (WACC), which of the following costs is adjusted for taxes in the equation? A. The before-tax cost of preferred stockB. The before-tax cost of equityC. The after-tax cost of debtD. The before-tax cost of debt

When calculating the afterminustax weighted average cost of capital (WACC), which of the following costs is adjusted for taxes in the equation? A. The before-tax cost of preferred stock

B. The before-tax cost of equity

C. The after-tax cost of debt

D. The before-tax cost of debt