Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later its debt

Question:

Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later its debt ratio is down to 15% (D/V = .15). The interest rate has dropped to 8.6%. Recalculate Federated’s WACC under these new assumptions. The company’s business risk, of capital, and tax rate have not changed. Use the three-step procedure explained in Section 19-3.

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...