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To understand the advantage of debt capital from a tax perspective in the United States,determine the before-tax and approximated after-tax weighted average costs of money
To understand the advantage of debt capital from a tax perspective in the United States,determine the before-tax and approximated after-tax weighted average costs of money if aproject is funded 30%-70% (D-E mix) with debt capital borrowed at 11% per year. A recent studyindicates that corporate equity funds earn 16% per year and that the effective tax rate is36% for the year.
The tax advantage reduces the WACCfrom __% to __% per year.
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