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Use the information for the question(s) below. Arnell Industries currently has no debt and an equity cost of capital of 10%. Suppose that Arnell decides
Use the information for the question(s) below. Arnell Industries currently has no debt and an equity cost of capital of 10%. Suppose that Arnell decides to increase its leverage and maintain a market debt-to-equity ratio of 4 . Suppose Arnell's debt cost of capital is 4% and its corporate tax rate is 30%. Assuming that Arnell's pre-tax WACC remains constant, then with the addition of leverage its aftertax WACC will be closest to: 6.00% None of the other answers are correct. 5.20% 10.96% 9.04%
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