Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The difference between the weighted - average cost of capital (WACC) and the pre-tax (unlevered) WACC is the weighted - average cost of capital is
The difference between the weighted - average cost of capital (WACC) and the pre-tax (unlevered) WACC is the weighted - average cost of capital is based on the after - tax cost of equity and the pre - tax WACC is based on the after - tax cost of debt. the weighted - average cost of capital multiplies the component costs of equity and debt by their weight in the capital structure, and the pre - tax WACC does not. the weighted - average cost of capital multiplies the cost of equity and the cost of debt by (1 - tax rate) and the pre - tax WACC does not. the weighted - average cost of capital multiplies the cost of debt by (1 - tax rate) and the pre - tax WACC does not
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started