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What is the effect on the after tax cost of debt and wacc

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Reference no: EM132930050

Question 1: If the corporate tax rate increases, what is the effect on the after tax cost of debt, the cost of equity and the WACC? Assume everything else remains the same.

Option 1: The after tax cost of debt decreases, the cost of equity decreases and the WACC decreases.

Option 2: The after tax cost of debt decreases, the cost of equity stays the same and the WACC decreases.

Option 3: All three stay the same.

Option 4: The after tax cost of debt decreases, the cost of equity stays the same and the WACC stays the same.

Reference no: EM132930050

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