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The Cost of Capital for a Firm, RWACC, in a Tax-Free

Question 43

Multiple Choice

The cost of capital for a firm, rWACC, in a tax-free environment is
I.equal to the market value weighted average of the return on equity and the return on debt;
II.equal to rA, the rate of return for that business risk class;
III.equal to the overall rate of return required on the levered firm


A) I only
B) II only
C) III only
D) I, II, and III

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