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The effect of tax rate on WACC— K. Bell Jewelers wishes to explore the effect on its cost of capital of the
The effect of tax rate on WACC— K. Bell Jewelers wishes to explore the effect on its cost of capital of the
rate at which the company pays taxes. The firm wishes to maintain a capital structure of 35% debt, 20% preferred stock, and 45 % common stock. The cost of financing with retained earnings is 15%, the cost of preferred stock financing is 11%, and the before-tax cost of debt financing is 11%. Calculate the weighted average cost of capital (WACC) given a tax rate of 35 %. You must MUST use at least one of the following Excel functions to answer at least one part of the question: FV, PV, PMT, RATE, NPER, NPV, AVERAGE, STDEV, and IRR.
