In general,firms should use their WACC to evaluate capital budgeting projects because most projects are funded with general corporate funds,which come from a variety of sources.However,if the firm plans to use only debt or only equity to fund a particular project,it should use the after-tax cost of that specific type of capital to evaluate that project.
Correct Answer:
Verified
Q2: If the expected dividend growth rate is
Q3: The cost of debt,rd,is normally less than
Q4: The lower the firm's tax rate,the lower
Q5: Suppose the debt ratio (D/TA) is 10%,the
Q7: The component costs of capital are based
Q9: The cost of external equity capital raised
Q10: If a firm's marginal tax rate is
Q11: The cost of common stock is the
Q21: If investors' aversion to risk rose, causing
Q34: The firm's cost of external equity raised
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents