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Which of the following statements is about the weighted average cost of capital (WACC) is NOT correct? out of n a. In the after-tax WACC calculation, a tax adjustment must be made for the cost of debt, but not the cost of equity. b. When calculating the value of the levered firm, double counting the interest tax shield in both the cash flows and WACC will lead to a firm valuation that is too high. If the company issues shares, and uses the proceeds to repay a loan, the before-tax WACC will be unchanged as assets and required return on assets) will be unchanged. d. If the company issues bonds and uses the proceeds to repurchase shares, the after-tax WACC will increase due to the higher interest tax shield from having more debt. A levered project’s firm free cash flows that include tax shields should be discounted using the before tax WACC.


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