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*26. Revtek, Inc., has an equity cost of capital of 12% and a debt cost of capital of 6%. Revtek

17 / 01 / 2019 Research Papers

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*26. Revtek, Inc., has an equity cost of capital of 12% and a debt cost of capital of 6%. Revtek 1 answer below » *26. Revtek, Inc., has an equity cost of capital of 12% and a debt cost of capital of 6%. Revtek main- tains a constant debt-equity ratio of 0.5, and its tax rate is 35%. What is Revtek’s WACC given its current debt-equity ratio? Assuming no personal taxes, how will Revtek’s WACC change if it increases its debt-equity ratio to 2 and its debt cost of capital remains at 6%? Now suppose investors pay tax rates of 40% on interest income and 15% on income from equity. How will Revtek’s WACC change if it increases View complete question » *26. Revtek, Inc., has an equity cost of capital of 12% and a debt cost of capital of 6%. Revtek main- tains a constant debt-equity ratio of 0.5, and its tax rate is 35%. What is Revtek’s WACC given its current debt-equity ratio? Assuming no personal taxes, how will Revtek’s WACC change if it increases its debt-equity ratio to 2 and its debt cost of capital remains at 6%? Now suppose investors pay tax rates of 40% on interest income and 15% on income from equity. How will Revtek’s WACC change if it increases its debt-equity ratio to 2 in this case? Provide an intuitive explanation for the difference in your answers to parts b and c. View less » Sep 17 2015 01:55 PM


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