Taxes are a relevant cost that should be accounted for in the firm's weighted average cost of capital.

Question

Quizplus · Accepted Answer

Taxes are relevant because the interest paid on debt is tax-deductible, which reduces the overall cost of debt financing for the firm. This reduces the weighted average cost of capital (WACC), which is used to evaluate the cost of financing a company's projects. Therefore, taxes should be accounted for in the firm's WACC calculation.

Taxes Are a Relevant Cost That Should Be Accounted for in the Firm's