NatNah, a builder of acoustic accessories, has no debt and an equity cost of capital of 15%.

Suppose NatNah decides to increase its leverage and maintain a market debt-to-value ratio of 0.5. Suppose its debt cost of capital is 9% and its corporate tax rate is 21%. If NatNah’s pretax WACC remains constant, what will its (effective after-tax) WACC be with the increase in leverage?

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