Which of the following is a true statement regarding the appropriate tax rate to

Question

Which of the following is a true statement regarding the appropriate tax rate to be used in the WACC? A.) One would use the marginal tax rate that the firm paid the prior year. B.) One would use the average tax rate that the firm paid the prior year. C.) One would use the weighted average of the marginal tax rates that would have been paid on the taxable income shielded by the interest deduction. D.) One would use the marginal tax rates that would have been paid on the taxable income shielded by the interest deduction.

Explanation / Answer

D.) One would use the marginal tax rates that would have been paid on the taxable income shielded by the interest deduction.

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