Question
SL Equipment is a company currently with a debt-to-equity ratio of 0.25. Shareholders currently require a return of 12% and the cost of debt is
SL Equipment is a company currently with a debt-to-equity ratio of 0.25. Shareholders currently require a return of 12% and the cost of debt is 5%. The corporate tax rate is 20%. What is the current WACC of this company?
What would be the WACC of this company if it changed its debt-to-equity ratio to zero?
What would be the WACC of this company if it changed its debt-to-equity ratio to 0.4?
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Income Tax Fundamentals 2013
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