The management at Welcome Home Hospitality 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). The cost of financing with debt is 7%. The retained earnings financing cost is 14%. Compute the weighted average cost of capital (WACC) for the following tax assumptions:

(A) Tax rate is 39%.

(B) Tax rate is 36%.

(C) Tax rate is 25%.

(D) All else being equal, if the tax rate goes up, what is the effect on the WACC?