The CFO of NET INC Ltd. believes that the company’s cost of equity is 11%. The company’s expected borrowing rate is 7%, and it pays Corporation Tax at 30%. One-half the company’s financing is debt.

(a) What would be the value of NETINC’s WACC?

(b) What would be the net income view of the value of the company’s WACC if the company were to reduce its debt financing from one-half to one-quarter?

(c) What would be the net operating income view of the value of the company’s WACC if the company were to reduce its debt financing from one-half to one quarter?