In the MM extension with growth,the appropriate discount rate for the tax shield is the after-tax cost of debt.

Name: In the MM extension with growth,the appropriate discount rate for the tax shield is the after-tax cost of debt.
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Quizplus · Accepted Answer

In the MM extension with growth, the appropriate discount rate for the tax shield is the cost of debt, not the after-tax cost of debt, because the tax shield itself is a function of the interest expense, which is before tax.

In the MM Extension with Growth,the Appropriate Discount Rate for the Tax