Question
The effect of tax rate on WACC K. Bell Jewelers wishes to explore the effect on its cost of capital of the rate at which
The effect of tax rate on WACC
K. Bell Jewelers wishes to explore the effect on its cost of capital of the rate at which the company pays taxes. The firm wishes to maintain a capital structure of 40% debt, 20% preferred stock, and 40% common stock. The cost of financing with retained earnings is 16%, the cost of preferred stock financing is 9%, and the before-tax cost of debt financing is 7%. Calculate the weighted average cost of capital (WACC) given a tax rate of 40%.
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The firm's WACC is enter your response here%.
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