Which of the following is the proper way to adjust the cost of debt to estimate

ID: 2741661 • Letter: W

Question

Which of the following is the proper way to adjust the cost of debt to estimate the after-tax cost of debt?

a. Rd/(1+Tc)

b. Rd/((1-Tc)

c. Rdx(1-Tc)

d. Rdx(1xTc)

The formula for the weighted average cost of capital (WACC) adjusted is ______.

a. D/V Tdx(1-TC+PS/VXRps+Rps+E?VxRe

b. D/VxRd+PS?VxRPS+E?VxE?Vx(1-Tc).

c. D?C+PS/VxRps+E/VxRex(1-TcxRd.

d. D/V+Rd+PS/VxRps+E/VxRex(1-Tc)

Managing the relationship between current assets and current liabitilities of a firm in order to improve the flow of funds is called ____.

a. the business operating cycle

b. the cash conversion cycle

c. working capital management

d. the production cycle

Solution.

1. Which of the following is the proper way to adjust the cost of debt to estimate the after-tax cost of debt.

b. Rd/((1-Tc)

Cost of debt reduce by tax rate because on debt interest company get tax benifit.

Where:-

Rd = Interest on debt

Tc = Tax rate

2. The formula for the weighted average cost of capital (WACC) adjusted is

c. D?C+PS/VxRps+E/VxRex(1-TcxRd.

3. Managing the relationship between current assets and current liabitilities of a firm in order to improve the flow of funds is called ____.

b. the cash conversion cycle

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