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Discuss whether these results are realistic and why

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Question - WACC is a very widely used metric in finance. Assuming Re = 6.5%, Rd = 4.5%, and Tc = 25%, in lecture 1 we discussed how a company with a 60%-40% equity to debt split has a WACC of 5.25%, but how a much more highly leveraged company with a 20%-80% equity to debt split has a WACC of 4.0%. Discuss whether these results are realistic and why.

Reference no: EM132969515

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