Asked by Andrew Cameron on Jun 27, 2024
Verified
Why should the debt portion of the WACC be adjusted for tax?
A) Because the interest paid on debt is not taxable at the firm level
B) Because the interest paid on debt is not taxable at the investor level
C) Because all components of the WACC are not taxable
D) Because the principle paid on the debt is not taxable at the firm level
WACC
The Weighted Average Cost of Capital represents a computation that determines a company's capital costs, with each type of capital being weighted according to its proportion.
Tax Adjustment
Modifications made to income or tax liability due to deductions, exemptions, and credits to comply with tax regulations or to benefit from them.
Interest Paid
The amount of money paid by a borrower to a lender in exchange for the use of borrowed money.
- Understand the impact of taxation on the components of capital cost.
Verified Answer
Learning Objectives
- Understand the impact of taxation on the components of capital cost.
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