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What would be the company WACC increase

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Question - Summit Pharmaceuticals has a cost of debt of 7.5 percent and an unlevered cost of capital of 12.7 percent. Assuming a tax rate of 22 percent, what is the target debt-equity ratio if the targeted cost of equity is 14.5 percent?

1) What is the target debt-equity ratio if the targeted cost of equity is 14.5 percent?

2) What would be the company's WACC increase if it implements a D/E ratio of 1.00 and the tax rate increases to 25 percent?

Reference no: EM132955247

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