When one uses the weighted average cost of capital (WACC)to value a levered firm,the interest tax shield is:

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The interest tax shield is automatically considered when using the WACC because the after-tax cost of debt is included in the WACC formula. This is because the interest tax shield reduces the cost of debt, resulting in a lower after-tax cost of debt, which is reflected in the WACC. Therefore, we do not need to subtract interest payments from cash flows or capitalize the levered cost of equity to account for the interest tax shield.

When One Uses the Weighted Average Cost of Capital (WACC)to