Question
Current WACC is 15%. Your cost of debt is 8% and you currently have 24% debt in the capital structure. The risk rate is 0.9%.
Current WACC is 15%. Your cost of debt is 8% and you currently have 24% debt in the capital structure. The risk rate is 0.9%. Determine what will happen to WACC if debt is increased to 33% of capital structure and debt data remains same at 0.7%, cost of debt also remains the same. The tax rate is 49%, and the firm's asset beta is 1.07. If the use of leverage is increased, what will be the WACC?
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
12th Edition
978-0030243998, 30243998, 324422695, 978-0324422696
