Question

Lewis runs an outdoor adventure company and wants to know what impact a tax change will have on his WACC. Currently Lewis has the following borrowing pattern:
Equity: 35% and cost of 14%
Preferred Stock: 15% and cost of 11%
Debt: 50% and cost of 10% before taxes.
What is the adjusted WACC for Lewis if the tax rate is
a. 40%?
b. 30%?
c. 20%?
d. 10%?
e. 0%?



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  • CreatedMay 08, 2014
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