Question
Question 3 (1 point) Which of the following statements is correct? Question 3 options: The after-tax cost of debt that should be used as the
Question 3 (1 point)
Which of the following statements is correct?
Question 3 options:
The after-tax cost of debt that should be used as the component cost when calculating the WACC is the average after-tax cost of all the firms outstanding debt. | |
The cost of capital used to evaluate a project should be the cost of the specific type of financing used to fund that project, i.e., it is the after-tax cost of debt if debt is to be used to finance the project or the cost of equity if the project will be financed with equity. | |
The cost of equity is generally harder to measure than the cost of debt because there is no stated, contractual cost number on which to base the cost of equity. | |
The bond-yield-plus-risk-premium approach is the most sophisticated and objective method for estimating a firms cost of equity capital. |
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