The Difference Between the Weighted-Average Cost of Capital (WACC)and the Pre-Tax

question 62

Multiple Choice

The difference between the weighted-average cost of capital (WACC) and the pre-tax (unlevered) WACC is:

• A)the weighted-average cost of capital is based on the after-tax cost of equity and the pre-tax WACC is based on the after-tax cost of debt.
• B)the weighted-average cost of capital multiplies the cost of equity and the cost of debt by (1-tax rate)and the pre-tax WACC does not.
• C)the weighted-average cost of capital multiplies the cost of debt by (1-tax rate)and the pre-tax WACC does not.
• D)the weighted-average cost of capital multiplies the component costs of equity and debt by their weight in the capital structure,and the pre-tax WACC does not.

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Definitions:

Notochord

A notochord is a flexible, rod-shaped structure found in the embryos of all chordates. Notochords served as the first “backbones” in early chordates, and in extant vertebrates the embryonic notochord becomes part of the vertebral column.

Primitive Brain

An early stage in the evolution of the brain, characterized by basic structures that control fundamental life functions, seen in lower animals.

Turgor Pressure

The pressure of water inside plant cells against the cell wall, which contributes to the stiffness of plant tissues and is essential for plant stability and nutrient uptake.

Pollinators

Animals that facilitate plant reproduction by transferring pollen from the male structures of a plant to the female structures of another, enabling fertilization.