The after-tax cost of debt is used to calculate the weighted average cost of capital since we are concerned with the after-tax cash flows of the firm.

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This statement is true because when calculating the weighted average cost of capital (WACC), we need to include both the cost of debt and the cost of equity in the calculation. The cost of debt is the interest rate the company pays on its debts, and since interest payments are tax-deductible, the after-tax cost of debt is used to reflect the cash flows of the firm. Therefore, by using the after-tax cost of debt, we can ensure that the WACC takes into account the tax benefits of debt financing, which can lower the overall cost of capital for a company.

The After-Tax Cost of Debt Is Used to Calculate the Weighted