Question: Why do we use an after - tax figure for cost of debt but not for cost of equity? Question 1 7 Answer a .

Why do we use an after-tax figure for cost of debt but not for cost of equity?
Question 17Answer
a.
Zero coupon bonds allow us to not pay taxes
b.
Debt is important only when taxes exist
c.
Equity does not provide a tax shield
d.
Equity can be collateralized and thus taxes are irrelevant
e.
Taxes are not important when evaluating the capital structure.

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