Determine united frypan after-tax wacc

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Assume that MM's theory holds except for taxes. There is no growth, and the $65 of debt is expected to be permanent. Assume a 21% corporate tax rate.

- What is United Frypan's after-tax WACC if rDebt = 7.5% and rEquity = 15.5%? (Enter your answer as a percent rounded to 2 decimal places.)

- Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new value of the firm, other things equal? Assume a borrowing rate of 7.5

Reference no: EM132502663

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