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Taggart Transcontinental currently has no debt and an equity cost of capital of 16%. Suppose that ...

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Taggart Transcontinental currently has no debt and an equity cost of capital of 16%. Suppose that ...

Taggart Transcontinental currently has no debt and an equity cost of capital of 16%. Suppose that Taggart decides to increase its leverage and maintain a market debt-to-value ratio of 1/3. Suppose Taggart's debt cost of capital is 9% and its corporate tax rate is 35%. Assuming that Taggart's pre-tax WACC remains constant, then with the addition of leverage its effective after-tax WACC will be closest to:
A) 12.9%
B) 13.0%
C) 15.0%
D) 16.0%

Textbook

Corporate Finance: The Core

Edition: 4^th

Authors: Berk, DeMarzo

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EgorGruzdev

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More solutions for this book are available here

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johnpaech Author

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5 years ago

Thanks for helping with my corporate finance course

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aakan29

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Thank you!

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Samuel L.

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thank you

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K K.

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Thank you

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