Are you surprised by this different tax handling of debt versus equity?. I need a discussion board along with responses to 2 classmates by Monday. Listed below is the assignment.
Primary Task Response: Within the Discussion Board area, write at least 500 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas.
- In the weighted average cost of capital formula, the after-tax cost of debt is used instead of the before-tax cost of debt. However, no such adjustment is made to the cost of equity. Are you surprised by this different tax handling of debt versus equity? Why or why not?
- If a corporation borrowed all of the money for its project at the risk-free rate, does that mean that the project’s cost of capital is the risk-free rate?
- When calculating the weighted average cost of capital, would it matter more if book values instead of market values were used for equity instead of debt? Please explain.
Be sure to document your posts with in-text citations, credible sources, and properly listed references.
Responses to Other Students: Respond to at least 2 of your fellow classmates with a reply of at least 100 words about their Primary Task Response regarding items you found to be compelling and enlightening. To help you with your discussion, please consider the following questions:
- What did you learn from your classmate’s posting?
- What additional questions do you have after reading the posting?
- What clarification do you need regarding the posting?
- What differences or similarities do you see between your posting and other classmates’ postings?
- For assistance with your assignment, please use your text, Web resources, and all course materials.