Consider the Following Formula

question 31

Multiple Choice

Consider the following formula:
R_wacc =
R_E +
R_D -
R_Dτ_c
The term
R_Dτ_c represents:

• A)the reduction due to the interest tax shield.
• B)the present value of the interest tax shield.
• C)the preset value of the future interest payments.
• D)the interest tax shield each year.

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Definitions:

Gross Sales

Gross sales represent the total sales revenue of a company without any deductions for returns, allowances, or discounts.

Periodic Inventory System

A method of inventory accounting where updates to inventory levels are made periodically at the end of an accounting period, rather than continuously.

Purchases Account

An account used in accounting to record goods acquired for resale during a particular period.

Inventory Account

An account on the balance sheet that reports the value of a company's products that are ready for sale but have not yet been sold.