For the formula of cost of debt = r(f) * (1-taxes) and cost of equity = r(f)

Fantastic news! We've Found the answer you've been seeking!

Question:

For the formula of cost of debt = r(f) * (1-taxes) and cost of equity = r(f) +beta*MRP, are both the "r(f)" using interest rates if having taxes and risk-free rate if no taxes?

OR if having taxes, the "r(f)" in cost of equity is still using risk-free rate?

Related Book For answer-question

Income Tax Fundamentals 2013

ISBN: 9781285586618

31st Edition

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill

See More Books

Posted Date: Mar 18, 2024 12:49 PM

See More Questions

Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
In Problem 10.16, we projected financial statements for Walmart Stores, Inc. (Walmart) for Years +1 through +5. The data in Exhibits 12.17-12.19 (pages 948-950) include the actual amounts for 2012...
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
The following information is available for HTM Corporation's defined benefit pension plan: On January 1, 2017, HTM Corp. amended its pension plan, resulting in past service costs with a present value...
According to a recently released study, mascots create more social media buzz than do celebrity endorsers. For example, in the study, the Pillsbury Doughboy scored 10 (highest on the scale) and...
Over what time period does the lessee amortize the leased asset transferred by the lessor?
Petitioner Curtis Flowers has been tried six separate times for the murder of four employees of a Mississippi furniture store. Flowers is black; three of the four victims were white. At the first two...
Plum Coatings Company purchased waterproofing equipment on January 2, 2011, for $450,000. The equipment was expected to have a useful life of four years, or 10,000 operating hours, and a residual...
The topic is Database Management Systems What is the purpose of a database? What are the contents of a database? What is a database management system (DBMS)? What are the components of a database...
The pandemic left us in a different place, a strange place, but is it forever going to be this way? Did the pandemic forever change job landscape and the way we "work?"Explain.
Consider the ultimatum game: The proposer offers a split of $10 between himself and the respondent. The proposer can choose any split (x, 10 x), where x [0, 10] is the amount the respondent gets...
Why do so many U.S. firms build their facilities in other countries in their supply chain designs?
(a) (b) Draw the block diagram representing the Harvard computer architecture, showing proper labels of different blocks and bus interconnections. [5 Marks] Most PIC18 MCUs provide data memory of up...
Our client, Vicki Farthing, has decided to purchase, personally, a used building in 2023 to be used in her new proprietorship business, which is considered to have started with preliminary work on...
You decide to deposit $171 monthly in a 2.9% annual interest bearing account over the next 15 years. How much will have accumulated in the account at the end of the period?
A decision maker has utility function u(x) = ?x with x ? 0. He is given the choice between two random amounts X and Y, in exchange for his entire present capital ?. The probability distributions of X...
What are the six activities involved in the physical supply/distribution system?
Professor Patricia (Patty) Pate is retired from the PalmSprings Culinary Arts Academy (PSCAA). She is a single taxpayer and is 68 years old. Patty lives at 98 Colander Street, Henderson, NV 89052....
The following additional information is available for the Dr. Ivan and Irene Incisor family. Ivan and Irene have the following investment income, in addition to that reported in Chapter 1: Dividends...
Sherry Hopson owns a retail family clothing store. Her store is located at 4321 Circle Drive, Houston, TX 77001. Her employer identification number is 95- 1234321 and her Social Security number is...
Is Fairmont in compliance with company policy that requires explicit approval of all hours of eighty hours or more.
d that Fairmont is not in complianThe forensic audit has determinece with Federal withholding requirements for FICA and Medicare because FICA and Medicare were not withheld from employee paychecks...
Which of the following is not a technique to conceal inventory shrinkage? 1. Counting and valuing the physical inventory at the end of each year 2. Writing off inventory after physical inventory...

For the formula of cost of debt = r(f) * (1-taxes) and cost of equity = r(f)

Question:

Expert Answer:

You are absolutely correct Heres the breakdown of the rf term in the formulas for cost of debt and c... View the full answer

Income Tax Fundamentals 2013

Students also viewed these finance questions