Question

For which capital component must you make a tax adjustment when calculating a firmâs weighted average cost of capital (WACC)?

a. Debt
b. Preferred stock
c. Equity

Answer 1

a. Debt

Step-by-step explanation:

For determining the weighted average cost of capital we used the after tax cost of debt as the interest expense is the tax deductible that represents that if there is any issue of debt so it would be decreased as of tax impact

Therefore as per the given situation, the debt is selected

hence, the option a is correct

And, all the other options are wrong