A tax adjustment must be made in determining the cost of__________
A) long-term debt
B) preferred stock
C) common stock
D) retained earnings

Name: A tax adjustment must be made in determining the cost of__________ A) long-term debt B) preferred stock C) common stock D) retained earnings
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Question

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Tax adjustments must be made in determining the cost of long-term debt. This is because interest paid on debt is tax-deductible, and therefore, the after-tax cost of debt is lower than the stated interest rate.

A Tax Adjustment Must Be Made in Determining the Cost