Which of the following is a capital component for the purpose of calculating the weighted average cost of capital in capital budgeting?
A) The after-tax cost of long-term debt
B) The after-tax cost of common stock
C) The after-tax cost of preferred stock
D) The after-tax cost of retained earnings
E) The after-tax cost of new equity

Question

Quizplus · Accepted Answer

The after-tax cost of long-term debt is a capital component used in calculating the weighted average cost of capital (WACC) as it represents the cost of borrowing funds.

Which of the Following Is a Capital Component for the Purpose