The specific cost of each source of long-term financing is based on ________ and ________ costs.
A) before-tax; historical
B) after-tax; historical
C) before-tax; book value
D) after-tax; current

Question

Quizplus · Accepted Answer

The specific cost of each source of long-term financing is based on after-tax and current costs. After-tax costs are used because interest payments on debt are tax-deductible, and current costs are used because the cost of financing changes over time due to factors such as interest rates and market conditions. The other options (A, B, and C) include incorrect factors such as before-tax, historical, or book value costs, which are not relevant in determining the cost of long-term financing.

The Specific Cost of Each Source of Long-Term Financing Is