6. This company has re=14% rd=8% D/V=.5 E/V= .5 and corporate tax rate of 25% why is the WACC not neccessarily equal to 10%? A) Current WAC may not apply to investments in new industry B) corporate tax rate is not applicable C) WACC calculation should be 11% not 10% D) current expexted return for equity does not reflext the risk

6. This company has re=14% rd=8% D/V=.5 E/V= .5 and corporate tax rate of 25% why is the WACC not neccessarily equal to 10%? A) Current WAC may not apply to investments in new industry B) corporate tax rate is not applicable C) WACC calculation should be 11% not 10% D) current expexted return for equity does not reflext the risk

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter21: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 2MC

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