pg-12 The effect of tax rate on WACC K. Bell Jewelers wishes to explore the effect on 4 of capital of the rate at which the company pays taxes. The firm wishes to capital structure of 40% debt, 10% preferred stock, and 50% common stock. The cost of financing with retained earnings is 10%, the cost of preferr maintain a ed stock financing is 8%, and the before-tax cost of debt financing is 6%. Calculate the weighted average cost of capital (WACC) given the tax rate assumptions in parts a to c. a. Tax rate= 40% b. Tax rate= 35% c. Tax rate-25% d. Describe the relationship between changes in the rate of taxation and the weighted average cost of capital