Consider the following equation: rwacc = rU - τcdrD
The term d in this equation is:
A)the project's unlevered cost of capital.
B)the project's dollar amount of debt.
C)the firm's unlevered cost of debt.
D)the project's debt to value ratio.

Question

Quizplus · Accepted Answer

The term d represents the project’s debt to value ratio, which is the ratio of debt to the sum of debt and equity. This ratio is used to calculate the levered cost of capital, which takes into account the cost of debt as well as the cost of equity.

Consider the Following Equation: Rwacc = RU - τCdrD