In order to find the present value of the tax shields provided by debt, the discount rate used is the
A)cost of capital.
B)cost of equity.
C)cost of debt.
D)T-bill rate.

Question

Quizplus · Accepted Answer

The discount rate used to find the present value of tax shields provided by debt is the cost of debt. This is because tax shields are based on the interest paid on debt, so the cost of debt is the appropriate discount rate.

In Order to Find the Present Value of the Tax