The after-tax average cost of all the long-term funds used by a corporation equals:
A)economic value added
B)return on investment
C)return on equity
D)weighted-average cost of capital

Question

Quizplus · Accepted Answer

The weighted-average cost of capital (WACC) is the after-tax average cost of all the long-term funds used by a corporation, including both debt and equity. It is used to determine the minimum rate of return required for a company to create value for its investors. Therefore, D is the correct choice. A, B, and C are all financial metrics and not directly related to the average cost of long-term funds.

The After-Tax Average Cost of All the Long-Term Funds Used