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For which capital component must you make a tax adjustment when calculating a firm's weighted average cost of capital

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User Pmckeown
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1 Answer

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When calculating a firm's weighted average cost of capital, WACC, all capital sources are included. This means you look at the stocks, common and/or preferred, bonds, as well as other long-term debts.

When making tax adjustments for the WACC, this needs to be made on Debt because interest paid on this capital component reduces Net Income.
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User Mike Hill
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