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A company is all-equity financed at a cost of 9%. Its tax rate is 35%. Capital markets are perfect, except for the existence of
A company is all-equity financed at a cost of 9%. Its tax rate is 35%. Capital markets are perfect, except for the existence of corporate income taxes. 1. Compute its WACC 2. How would the CoE change if the firm were to change its capital structure by buying back shares and issuing debt (= leveraged recapitalization) so as to reach a 25% D/V ratio? Assume that the CoD would be 3% 3. What would be its new WACC? 4. If there were no taxes, what would be the new CoE and WACC?
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
