Optimal level of leverage from tax-saving perspective

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Reference no: EM131911742

1. Western Car Company has a WACC of 10.6%. Peachy Computers has a WACC of 12.3%. What could explain this difference? Will your explanation hold all the time? Why?

2. Define EBIT and discuss why the optimal level of leverage from a tax-saving perspective is the level at which interest equals EBIT. Does this have a connection with under-leveraging corporations--both domestically and internationally?

Reference no: EM131911742

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