1. What is the pre-tax and after tax weighted average costs of capital for a $100 million company with a cost of equity of 18% and a pre-tax cost of debt of 8% when its tax rate is 25% and its debt to equity ratio is: a. 0.50 b. 1.00 c. 1.50

2. Repeat problem 1 but this time use a tax rate of 40%. Now what are the pre-tax and after tax weighted average costs of capital when its debt to equity ratio is: a. 0.50 b. 1.00 c. 1.50

3. What happens to the weighted average costs of capital when the debt to equity ratio increases?

4. What happens to the after-tax weighted average costs of capital when the tax rate increases?