Attempts $$ Keep the Highest $/15$

$2.$ The Cost of Capital: Cost of Debt is the $$ cost of debt, $r_d(1-T).$ The $$ after$-$tax $$ cost of debt is used in calculating the WACC because we are interested in maximizing the value of the firm's stock, and the stock price depends on before$-$tax cash flows. It is important to emphasize that the cost of debt is the interest rate on $$ debt, not new w $$ debt because our primary concern with the cost of capital is its use in capital budgeting decisions. The rate at which the firm has borrowed in the past is $$ because we need to know the cost of $$ I capital. For these reasons, the $$ yield to maturity on outstanding debt $($which reflects current market conditions$)$ is a better measure of the cost of debt than the $$

$$ c$.$ The yield to maturity $$ on the company's long $$ c $-$term debt is generally used to calculate the cost of debt because, more often than not, the capital is being raised to fund long $-$term projects.

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