The weighted average cost of capital formula (WACC) shown below is the accepted method of computing a firms cost of capital.

WACC_adj = E X R_e + PS X R_ps + D X R_d X ( 1 Tc)

V V V

Where:

E = Equity dollars of financing

PS = Preferred Stock dollars of financing

D = Debt (bond) dollars of financing

V = Total financing = E +PS +D

R_e = % Cost of Common Stock

R_ps = % Cost of Preferred Stock

R_d = % Cost of Debt after tax

T_c = Effective tax rate

After reviewing this formula, your reading assignments and the instructors PowerPoint presentation, in a one paragraph posting, answer the following questions and provide a short supporting rationale for each answer. The answer does not require a quantitative solution

What impact will the following company actions have on the companys weighted average cost of capital (WACC):

1. An Increase in the companys corporate tax rate?

2. An Increase in the companys flotation cost?

3. An increase in the companys dividend?

Can you demonstrate your answer mathematically?