Consider the Following Formula: R_wacc = R_E

question 78

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:

Multiply

To increase in number by a specific factor; in arithmetic, it is the operation of adding a number to itself a certain number of times.

Decimal

A figure that features a decimal point to signify a part of a whole.

Round

To approximate a number to a specified degree of significance, often to the nearest whole number.

Whole Number

A number without fractions or decimals; an integer.