Question
Rolm Telephone Corp currently has a cost of debt of 5.5%, a cost of equity of 13%, and a marginal tax rate of 28%. Explain
Rolm Telephone Corp currently has a cost of debt of 5.5%, a cost of equity of 13%, and a marginal tax rate of 28%. Explain the impact on Rolms WACC and NPV in the two following scenarios. (I havent given you the weights and there is no need to actually calculate the WACC.) (There are several parts to this question; 1 sentence for each item.) Scenario 1: Congress will passes a special Telecomm Tax that will raise their marginal tax rate to 34%. Impact on WACC: Impact on NPV: Scenario 2: Recent litigation has dramatically increased Rolms perceived risk and Rolms beta has increased. Impact on WACC: Impact on NPV:
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