Why do we use an after-tax figure for cost of debt but not for cost of equity?

Q: What would be Oberon's before-tax component cost of debt? (Round your answer to 2 declmal places.)

A: Cost of debt: It is the cost of raising debt capital for the issuers. The same cost of debt becomes…

Q: How can we determine the after-tax cost of debt?

A: Cost of capital is the overall cost of financing the funds from all sources of finance. The cost of…

Q: why an increase in cost of debt will increase cost of capital associated with business risk and…

A: The cost of capital is the minimal rate of return that a company must earn before it may generate…

Q: Discuss how the change in the Debt service changed analysis (i.e. how did it change the property…

A: Debt service includes interest and principal amount paid in any year for the loan obtained. That is,…

Q: what happens to the cost of debt if the pourcentage of debt gets lower in the capital structure

A: Cost of debt is the return that is expected by all debt holders. They get their return in the form…

Q: How much is the gain on debt restructuring?

A: Given data,   Old liability: Principal=P9,000,000 Accrued Interest=P810,000 Interest Rate: 9%   New…

Q: Is there a consequence for reported profit or loss if a particular financial instrument, for…

A: Equity Stock represents the ownership in the company. Equity shareholders have the residual claim on…

Q: Why is the after tax cost of debt rather than the before tax cost used to calculate the weighted…

A: Weighted average cost of capital :  WACC or Weighted average cost of capital, as the name suggests,…

Q: What are the objectives of accounting for income taxes?

A: FASB Summary of Statement No. 109 defines objectives of Accounting for Income Taxes.

Q: computing the cost of debt, a tax adjustment is required t arrive at after-tax cost of debt. Why is…

A: Cost of Equity: It is the rate of return the company pays to the investor for investing in the…

Q: company's cost of debt capital?

A: Cost of debt is the amounts of the cost which are required by the company to pay have to pay to the…

Q: How does the cost of equity based on internal funds differ from the cost of equity based on external…

A: Note: Since you have asked multiple questions, we will solve the first question for you. If you want…

Q: Compare and contrast financing with debt vs. equity.  What is being financed?

A: Financing refers to raising the funds from different sources in order to carry out the business…

Q: What is calculation of before Tax (Equity) Cash Flow?  Please provide example.

A: The cash flow, which is generated by an investment after deducting all payments of all expenses from…

Q: What is meant by debt and equity?

A: Equity:Equity is referred to as stock, specifying the interest of ownership in the entity. Equity…

Q: The most important non-cash item is a) Debt interest rate b) Income tax c) Dividend d) Depreciation

A: Answer

Q: When is debt to asset ratio important when raising money

A: Debt to asset ratio is one of the important ratios that we use in finance. This is essentially a…

Q: How to record purchase of a  debt investment? Give an example.

A: Journal entry: Journal entry is a set of economic events which can be measured in monetary terms.…

Q: How do you calculate the relative advantage of the debt given the highest corporate tax rate, the…

A: Relative Tax Advantage is tax savings made by firm by having debt in their capital structure and…

Q: Discuss the optimal amount of debt in the presence of taxes and costs associated with financial…

A: Financial distress is a situation or a point where a firm is unable to pay its debt or firm is…

Q: EBITD is equivalent to profits after taxes. true or false?

A: EBITDA is the earnings before interest tax depreciation and amortization.

Q: list advantages and disadvantages of debt and common equity

A: Debts are the borrowed funds and debenture holders are creditors of the firm. Debts are those funds…

Q: Should short-term

A: The cost of capital is the rate of return that is expected by the firm to earn from its investment…

Q: What will be the Effect of the After-Tax Interest Cost on Loan Decisions?

A: Interest cost for loan borrowers depends mainly upon the rate of interest charged by lenders.…

Q: a. What is STP's unlevered cost of capital? b. What is STP's after-tax debt cost of capital? c. What…

A: a) Total common stock value = 32 * 12 = 384 Total debt = 100 Total value = 384 + 100 = 484 Unlevered…

Q: sources of financing through LO

A: Long term debt is a non current liability that is liable to be paid after one or more years.

Q: When is a gain recognized in a debt restructuring?

A: Debt restructuring is a process which the companies are using to avoid the risk of default on…

Q: How much was the profit before finance cost and income tax?

A: Cash Flow Statement is a part of the Financial Statement of a company. It literally means a…

Q: Why is the after-tax cost of debt rather than the before-tax cost used to calculate the WACC?

A: WACC refers to weighted average cost of capital. It is the rate which a firm pays to its security…

Q: Define after-tax cost of cost of debt

A: The amount that is raised by the company by issuing the bonds or borrowing from the financial…

Q: Why is the after-tax cost of debt, rather than its before-taxrequired rate of return, used to…

A: The mix of equity and debt is a business organization is known as the capital structure of the…

Q: What is the actual cost of capital to the borrower?

A: The cost of capital to the borrower is the weighted average cost of capital from all sources of…

Q: One should determine the after-tax weighted average cost of capital by   Multiple Choice A)…

A: After-tax weighted average cost of capital = Weighted average after tax cost of debt + Weighted…

Q: Why are claims on income discretionary with equityfinancing but nondiscretionary with debt…

A: Liability: In monetary bookkeeping, a liability is characterized as the future penances of financial…

Q: Why isn’t accounting net income used in the net present value method of making capitalbudgeting…

A:

Q: compute for the after tax cost of debt.

A: 12   Calculate cost of equity using CAPM model as shown below:     Cost of equity Risk free…

Q: Are debtors calculated at selling price or finished goods price? and why?

A: The word debtor comes from the word debt which means a company or an individual having a debt…

Q: Which mathematial expression is used to calculate the after tax cost of debt?

A: Cost of debt: Cost of debt is the effective rate of interest that the firm pays on its present…

Q: should we expect the flotation costs for debt to be significantly lower than those for equity

A: Flotation costs are the expenses incurred by a firm when it issues fresh stock. Flotation costs…

Q: Which form of financing has the lower after-tax cost, debt or equity? Why?

A: There are two sources of financing for a company. One is debt financing and another is equity…

Q: what are the examples of Items that can  be adjusted directly against equity rather than including…

A: Profit or loss account is a revenue account, whereas the equity account is a capital account. Equity…

Q: What methods can be used to find the before-tax cost of debt? How is the before-tax cost of debt…

A: Debt is always considered after tax, because interest on debt is a tax deductible expense.

Q: While computing the cost of equity using the formula , we do not make any adjustment to express the…

A: Cost of equity is the return paid to individuals for making equity investment in the company. Cost…

Q: What will be the Effect of Interest Rates on the After Tax IRR on Equity?

A: "Financial leverage is a double edged sword". If the company is not managing its financial resources…