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Assume the following data for firm's A capital structure and financing conditions: Cost of debt 0.06 Cost of equity 0.124 Marginal tax rate 0.20 Debt
Assume the following data for firm's A capital structure and financing conditions: Cost of debt 0.06 Cost of equity 0.124 Marginal tax rate 0.20 Debt financing (mv) 500 Equity financing (mv) 750 From this old structure, the firm now instead switches to debt financing 750 (mv) and equity financing 500 (mv). The cost of debt financing in this alternative scenario increases by 40 bps due to greater risk. What is the change in after-tax WACC from old to new scenario? Provide your answer with 4 digits after the comma, in decimal form. [E.g. if your answer were that WACC decreases by 4.13%, you would type "-0.0413'] Selected Answer: 0.1624 Correct Answer: -0.0029 Answer range +00001000300.000280)
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