The after-tax average cost of all the long-term funds used by a corporation equals:
A)economic value added.
B)return on investment.
C)weighted-average cost of capital.
D)return on equity.

Question

Quizplus · Accepted Answer

The weighted-average cost of capital (WACC) is the average cost of all the long-term funds used by a corporation, including both debt and equity. This cost is calculated after taking into consideration the tax implications. Therefore, C is the correct option. Economic value added is a measure of the value created by a company after deducting the cost of the capital used, and return on investment and return on equity are measures of profitability, not cost.

The After-Tax Average Cost of All the Long-Term Funds Used