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QUESTION 17 Which of these costs involves an adjustment for tax deductibility? KCS KD KPS KRE

QUESTION 17

  1. Which of these costs involves an adjustment for tax deductibility?

KCS

KD

KPS

KRE
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Answer #1

Kcs is the cost of common stock , dividends against the same are not tax deductible, hence this does not need adjustment for tax deductibility

Kd is the cost of debt , interest payments against the cost of debt is tax deductible ,hence this needs adjustment for tax deductibility

Kps and Kre are costs of preferred stock and retained earnings, are not tax deductible, hence these does not need adjustment for tax deductibility

So, Kd is the correct answer (2nd option)

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