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The management at ABC Co will consider the tax effect on the cost of capital for new capital projects, the current policy of capital structure
The management at ABC Co will consider the tax effect on the cost of capital for new capital projects, the current policy of capital structure is 40% debt, 60% common shares (no preferred stock), cost of financing 7%, retained earnings financing cost is 14%, compute the WACC for the following tax assumptions 39%, 36%, 25%, all else being equal if the tax rate goes up, what is the effect on WACC?
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