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How is the WACC - cost of debt affected by a tax benefit?

Full Question:
I have a question regarding cost of debt calculation. If a company has a tax benefit rather than the usual tax expense, then how is the after tax cost of debt calculated?

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by Guest 1.

added 11 years ago

RE: ROE vs Revenue as stock return predictor

1) Revenue - correct, it does not capture expenses or profit margins. the "retention" of the revenue is very important! the more of that dollar of revenue you keep, the more it is worth! 2) ROE is an important metric for banks because they employ leverage - they borrow deposits and use that to ma... Read More

by WST Expert 1.

added 11 years ago

RE: How is the WACC - cost of debt affected by a tax benefit?

Recall that WACC and therefore, the cost of debt is based on marginal, incremental borrowing rate. You are always trying to capture a "normalized" run-rate discount rate. The fact that you have NOL's (tax benefit) should be irrelevant because again, one is trying to capture normalized tax rate and t... Read More

by WST Expert 1.

added 11 years ago

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