Project #84244 - finance

Please use short answer to respond to these question.

 

The weighted average cost of capital formula (WACC) shown below is the accepted method of computing a firm’s cost of capital.

 

WACC = (E/V)(Re )  +  (PS/V)(Rps )  + (D/V)(Rd  (1 - Tc)

 

Where:

 

E     = Equity dollars of financing    

 

PS   = Preferred Stock dollars of financing

 

D     = Debt (bond) dollars of financing           

 

V     = Total financing = E +PS +D

 

 Re     = % Cost of Common Stock

 

Rps   = % Cost of Preferred Stock

 

Rd    = % Cost of Debt after tax

 

Tc    = Effective tax rate                

 

After reviewing this formula, your reading assignments and the PowerPoint presentation, in a one paragraph posting, answer the following questions and provide a short supporting rationale for each answer.  The answer does not require a quantitative solution.

 

 

 

What impact will the following company actions have on the company’s weighted average cost of capital (WACC):

 

 

 

1. An Increase in the company’s corporate tax rate?

 

 

 

2. An Increase in the company’s flotation cost?

 

 

 

3. An increase in the company’s dividend?

 

 

 

Can you demonstrate your answer mathematically?

 

Subject Business
Due By (Pacific Time) 09/30/2015 12:00 am
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