Consider the Following Formula: R_wacc = R_E

question 43

Multiple Choice

Consider the following formula: r_wacc = r_E + r_D - r_Dτ_c
The terms r_E + r_D represent

• A) the after tax WACC.
• B) the reduction due to equity financing.
• C) the before tax WACC.
• D) the reduction due to the interest tax shield.

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Definitions:

Perpetual Inventory

A method used in inventory accounting that immediately notes the sale or acquisition of inventory through computerized point-of-sale systems and enterprise asset management software.

Inventory Accounting Systems

Methods used by companies to keep track of their inventory levels, costs, and value, including systems like FIFO, LIFO, and weighted average.

Inventory Valuation

The method or process of calculating the cost/value of inventory that a business holds at any given time, which affects cost of goods sold and profitability.

Merchandising Company

A business entity that purchases finished goods and resells them to consumers to earn a profit without altering the physical form of the goods.