Question
NatNah, a builder of acousticaccessories, has no debt and an equity cost of capital of 16 %. Suppose NatNah decides to increase its leverage to
NatNah, a builder of acousticaccessories, has no debt and an equity cost of capital of 16 %. Suppose NatNah decides to increase its leverage to maintain a marketdebt-to-value ratio of 0.5. Suppose its debt cost of capital is 9 % and its corporate tax rate is 36 %. IfNatNah's pre-tax WACC remainsconstant, what will be its(effective after-tax) WACC with the increase inleverage?
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Personal Financial Planning
Authors: Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk
14th edition
978-1305887725, 1305887727, 1305636619, 978-1305636613
