One calculates the weighted average cost of capital (WACC), on an after-tax basis, as WACC = (r_D)(1 − T_C )(D/V)+ (r_E)(E/V), where V = D + E.

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Quizplus · Accepted Answer

This is the correct formula for calculating the weighted average cost of capital (WACC) on an after-tax basis, where rS1U1B1D represents the cost of debt, U1B1D represents the amount of debt, D/V represents the proportion of debt, rS1U1B1E represents the cost of equity, U1B1E represents the amount of equity, and E/V represents the proportion of equity. The (1- TS1U1B1C/TS1U1B0 ) factor represents the tax shield from debt.

One Calculates the Weighted Average Cost of Capital (WACC), on an After-Tax