Which of the following components of capital structure is adjusted to account for tax savings?
A) Cost of preferred stock
B) Cost of debt
C) Cost of retained earnings
D) Cost of new issue of common stock
E) Cost of dividend payout

Question

Quizplus · Accepted Answer

The cost of debt is adjusted for tax savings because interest paid on debt is tax-deductible, leading to a lower after-tax cost of debt.

Which of the Following Components of Capital Structure Is Adjusted