Question

Because the value of a firm's stock depends on the after-tax cash flows it generates during its life, after-tax component costs of capital (i.e., the after-tax cost of debt) are used when computing a firm's weighted average cost of capital (WACC).

Answer 1

The answer is said to be True

Step-by-step explanation:

The weighted average cost of capital is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.

All sources of capital, including common stock, preferred stock, bonds, and any other long-term debt are entirely included in a weighted average cost of capital calculation.

Debt and equity are two components that constitute a company's capital funding. Lenders and equity holders will expect to receive certain returns on the funds or capital they have provided, since the cost of capital is the return that equity owners and debt holders will expect, WACC indicates the return that both kinds of stakeholders can expect to receive.

Answer 2

True

Step-by-step explanation:

Base on the scenario been described in the question, we know that, when the value of a firm's stock depends on the after-tax cash flows it generates during its life, after-tax component costs of capital (ACCC). The weighted average cost of capital ( WACC) are computed by the after tax components costs of capital (ACCC) , as seen in the question which is true