FINANCE

FINANCE

use short answer to respond to these question.

The weighted average cost of capital formula (WACC) shown below is the accepted method of computing a firm’s cost of capital.

WACC = (E/V)(Re ) + (PS/V)(Rps ) + (D/V)(Rd (1 – Tc)

Where:

E = Equity dollars of financing

PS = Preferred Stock dollars of financing

D = Debt (bond) dollars of financing

V = Total financing = E +PS +D

Re = % Cost of Common Stock

Rps = % Cost of Preferred Stock

Rd = % Cost of Debt after tax

Tc = Effective tax rate

After reviewing this formula, your reading assignments and the PowerPoint presentation, in a one paragraph posting, answer the following questions and provide a short
supporting rationale for each answer. The answer does not require a quantitative solution.

What impact will the following company actions have on the company’s weighted average cost of capital (WACC):

1. An Increase in the company’s corporate tax rate?

2. An Increase in the company’s flotation cost?

3. An increase in the company’s dividend?

Can you demonstrate your answer mathematically?

FOR YOUR ASSIGNMENTS TO BE DONE AT A CHEAPER PRICE PLACE THIS ORDER OR A SIMILAR ORDER WITH US NOW