Question
A company currently has a 30% debt-ratio. Its cost of debt is 5% and cost of equity is 14%. The tax rate is 21%. What
A company currently has a 30% debt-ratio. Its cost of debt is 5% and cost
of equity is 14%. The tax rate is 21%. What will happen to its WACC if the debt ratio is increased to 40%? Show the appropriate calculations.
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Public Finance and Public Policy
Authors: Jonathan Gruber
4th edition
1429278455, 978-1429278454
