General Studies · Cost of Capital
A logistics provider has an initial capital structure of 60 percent equity and 40 percent debt with a WACC of 12 percent. The cost of debt is 8 percent before tax, and the tax rate is 25 percent. The firm is considering a project that will be financed entirely by debt, which will change the target capital structure to 50 percent equity and 50 percent debt. If the cost of equity increases by 100 basis points due to the increased leverage, what will be the new WACC?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 111.5 percent✓
- 212.2 percent
- 311.0 percent
- 410.8 percent
Correct answer
11.5 percent
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