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    Why is the cost of capital most appropriately measured on an after-tax basis? What effect, if any, does this have on specific cost components

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    The cost of capital is the required rate of return that a firm must achieve in order to cover the cost of generating funds in the marketplace. Another way to think of the cost of capital is as the opportunity cost of funds, since this represents the opportunity cost for investing in assets with the same risk as the firm. When investors are shopping for places in which to invest their ...

    Solution Summary

    Why the cost of capital is most appropriately measured on an after-tax basis is discussed.