When Weighted Average Cost of Capital (WACC) Is Used to Value

question 52

Multiple Choice

When weighted average cost of capital (WACC) is used to value a levered firm, the interest tax shield is:

• A) ignored.
• B) considered by deducting the interest payment from the cash flows.
• C) automatically considered because the after-tax cost of debt is used in the WACC formula.
• D) none of the above

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Definitions:

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Norms that identify the difference between laudable and blameworthy habits.

Summun Bonum

A Latin term meaning the highest or supreme good, often used in ethical, philosophical, and metaphysical contexts to denote the ultimate importance or aim.

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