Quiz Ch 10 – T/F Debt Ratio and WACC Impact

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition

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True or false: If the debt ratio is 50%, the interest rate on new debt is 8%, the current cost of equity is 16%, and the tax rate is 40%, then increasing the debt ratio to 60% would indeed need to result in a reduction in the weighted average cost of capital (WACC).

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