NatNah, a builder of acoustic accessories, has no debt and an equity cost of capital of 15%.

Question:

NatNah, a builder of acoustic accessories, has no debt and an equity of 15%. NatNah decides to increase its leverage to maintain a market debt-to-value ratio of 0.5. Suppose its debt is 9% and its corporate tax rate is 35%. If NatNah’s pretax WACC remains constant, what will its (effective after-tax) WACC be with the increase in leverage?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...