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Corporate Tax on the WACC of Businesses

A. What are the effects of a corporate tax on the WACC of businesses?

B. Is minimizing WACC by having a largely debt-based capital structure a high risk strategy, given the threat of bankruptcy in an overleveraged business? Explain.

C. What are extraneous factors which impact the ability of a business to radically after its debt-equity mix?

Solution Summary

Is minimizing WACC by having a largely debt-based capital structure a high risk strategy, given the threat of bankruptcy in an overleveraged business? Explain.

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