Q 88

The difference between the weighted-average cost of capital (WACC) and the pre-tax (unlevered) WACC is: A) the weighted-average cost of capital is based on the after-tax cost of equity and the pre-tax WACC is based on the after-tax cost of debt. B) the weighted-average cost of capital multiplies the cost of equity and the cost of debt by (1-tax rate) and the pre-tax WACC does not. C) the weighted-average cost of capital multiplies the cost of debt by (1-tax rate) and the pre-tax WACC does not. D) the weighted-average cost of capital multiplies the component costs of equity and debt by their weight in the capital structure, and the pre-tax WACC does not.

Multiple Choice