Consider the following equation: r_wacc = r_U - τ_cdr_D The termdin this equation is A) the project's unlevered cost of capital. B) the project's dollar amount of debt. C) the firm's unlevered cost of debt. D) the project's debt-to-value ratio.

Question

Quizplus · Accepted Answer

The term "d" in the equation represents the project's debt-to-value ratio, which is used to adjust the weighted average cost of capital (WACC) for the tax shield benefit of debt.

Consider the Following Equation: Rwacc = RU - τcdrD

Consider the Following Equation: R_wacc = R_U - τ_cdr_D