Currently Joplin Publishing's tax rate is 30%, its beta is 0.92, and it is financed with 58% debt at a before-tax cost of 3% and the remainder with equity at a cost of equity of 13.62%. The company does not expect any change in its capital structure, but its tax rate is expected to drop to 22% next year. No changes are expected to the before-tax cost of debt or of equity as the result of the change in tax rate. 

By how much should the weighted average cost of capital change given the expected change in tax rate?

Answer rating: 100% (QA)

To find out how much the weighted average cost of capital WACC should change we first need to calcul... View the full answer