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The current weighted average cost of capital (WACC) for company ABC is 10%. The leverage ratio is relatively high compared with the industry peers. Therefore,
The current weighted average cost of capital (WACC) for company ABC is 10%. The leverage ratio is relatively high compared with the industry peers. Therefore, the Chief Financial Officer (CFO) of this company would like to reduce the D/V ratio from 50% to 30% next year. Calculate the new WACC based on the target capital structure. Assume the tax rate for Company ABC is 30%.
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