before-tax cost of debt, which is lower than the after-tax cost, is used as the component cost of debt for purposes of developing the firm's WACC.

Name: before-tax cost of debt, which is lower than the after-tax cost, is used as the component cost of debt for purposes of developing the firm's WACC.
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Question

Quizplus · Accepted Answer

The after-tax cost of debt is used in calculating the WACC because interest expenses are tax-deductible, reducing the effective cost of debt for the firm.

Before-Tax Cost of Debt, Which Is Lower Than the After-Tax