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Rearden Metal currently has no debt and an equity cost of capital of 14%. Suppose that Rearden decides to increase its leverage and maintain a
Rearden Metal currently has no debt and an equity cost of capital of 14%. Suppose that Rearden decides to increase its leverage and maintain a market debt-to-equity ratio of 1 . Suppose Rearden's debt cost of capital is 8% and its corporate tax rate is 40%. Assuming that Rearden's pre-tax WACC remains constant, then with the addition of leverage its effective after-tax WACC will be closest to: A. 10.8% B. 12.4% C. 12.8% D. 13.4%
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