When Using the Cost of Debt,the Relevant Number Is The

question 50

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.
• E) None of these.

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Definitions:

Long-Run Equilibrium

A market condition where supply equals demand, all firms are maximizing profit, and no firm has an incentive to change its output.

Club Meeting

An organized gathering of members belonging to a particular club or group to discuss matters of common interest.

Attendance

The act of being present at a specified place, such as a meeting, class, or event.

Persons

Refers to human individuals or beings.