Which of the following statements is correct?
A) The WACC is a measure of the before-tax cost of capital.
B) The WACC measures the marginal cost of capital.
C) It is common that the after-tax cost of debt exceeds the cost of equity.
D) None of the options are correct.

Question

Quizplus · Accepted Answer

The Weighted Average Cost of Capital (WACC) measures the marginal cost of capital, which is the cost of the last dollar of capital raised. It incorporates the cost of equity, the cost of debt, and the tax shield benefits of debt, providing a comprehensive measure of the cost of capital for a firm.

Which of the Following Statements Is Correct