When Using the Cost of Debt, the Relevant Number Is

question 51

Multiple Choice

When using the cost of debt, the relevant number is the:

• A) pre-tax cost of debt since most corporations pay taxes at the same tax rate.
• B) pre-tax cost of debt since it is the actual rate the firm is paying bondholders.
• C) post-tax cost of debt since dividends are tax deductible.
• D) post-tax cost of debt since interest is tax deductible.