Natah, a builder of acoustic accessories, has no debt and an equity cost of capital...
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Finance
Natah, a builder of acoustic accessories, has no debt and an equity cost of capital of 16%. Suppose NatNah decides to increase its leverage and maintain a market debt-to-value ratio of 0.4. Suppose its debt cost of capital is 8% and its corporate tax rate is 38%. If NatNah's pretax WACC remains constant, what will its (effective after-tax) WACC be with the increase in leverage? (Hint: the pretax WACC is what we referred to in class as the unlevered cost of capital.) The effective after-tax WACC will be %. (Round to two decimal places.)
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