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

Multiple Choice

The cost of capital for a firm, r_WACC, in a tax-free environment is

A) equal to the market value weighted average of the return on equity and the return on debt.
B) equal to r_A, the rate of return for that business risk class.
C) equal to the overall rate of return required on the levered firm.
D) equal to the market value weighted average of the return on equity and the return on debt; equal to r_A, the rate of return for that business risk class; and equal to the overall rate of return required on the levered firm.