Debt to Assets ratio and WACC
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Suppose the bebt to assets ratio (D/TA) is 10%, the current cost of debt is 8 %, the current cost of equity is 16% and the tax rate is 40%. An increase in the debt to assets ratio to 20% would decrease the weighted averate cost of capital
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This provides the impact of Debt to Assets ratio on WACC
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True, it will reduce the weighted average cost of capital. As the debt has increased which has less cost than equity. It will lead to reduction in weighted ...
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