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Tax laws and cost of capital

How do tax laws affect the cost of capital? How would a change in a company's debt rating impact the cost of capital?

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How do tax laws affect the cost of capital?

The cost of capital is the after tax cost of capital. The cost of debt is affected by the tax rate since the interest amount is tax deductible. The cost of equity is not affected as there are no tax ...

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The solution explains how tax laws affect the cost of capital.

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