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Brite Lighting Corporation - WACC at different tax rates - 14 Aug, 2013

Brite Lighting Corporation wants to investigate the effect on its cost of capital based on the rate at which the company is taxed. The firm wishes to maintain a capital structure of 30% debt, 10% preferred  stock, and 60% common stock. The cost of financing with retained earnings is 14% (i.e., rs = 14%), the cost of preferred stock financing is 9% (rps = 9%), and the before-tax cost of debt is 11% (rd = 11%).

Calculate the weighted average cost of capital (WACC) given the tax rate assumptions in parts (a) to (c)

below. (a) Tax rate = 40%. (b) Tax rate = 35%. (c) Tax rate = 25%.



Category : Financial Management

Search Keywords :
Brite , Lighting , Wacc , Debt , Preferred , Common , Tax , Rate 


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Answer  - 14 Aug, 2013
Please see the excel attachment....


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