When estimating an average corporate after-tax cost of capital, the component cost of equity is multiplied by (1-t) to allow for the tax-deductibility of dividend payments.

Question

Quizplus · Accepted Answer

Dividend payments are not tax-deductible for corporations; it is the interest on debt that is tax-deductible, which affects the cost of debt, not the cost of equity.

When Estimating an Average Corporate After-Tax Cost of Capital, the Component