Description of this paper

Minuteman Mountain Tours currently has zero debt.

Description

solution


Question

Minuteman Mountain Tours currently has zero debt. Now the company is considering using some debt, moving to a 55% debt, 45% equity financed firm. The interest rate on the new debt would be be 7% and the company's tax rate is 40%. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise 1% from it's current 10%. If this plan were carried out, by how much would the WACC change?

 

Paper#21680 | Written in 18-Jul-2015

Price : $27
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