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Aroma Chemicals has a debttoequity ratio of 0.7. The companys weighted average cost of capital (WACC) is 8%, while its cost of equity is 12%.

Aroma Chemicals has a debttoequity ratio of 0.7. The companys weighted average cost of capital (WACC) is 8%, while its cost of equity is 12%. Given a marginal tax rate of 30%, the companys aftertax cost of debt is closest to:

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2.29%

3.27%

4.35%

What is the primary thesis of ModiglianiMiller propositions regarding companies changing their capital structure and the value of their firms?

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It does not change value.

It adds value.

It subtracts value.

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