Assume that investors hold Google stock in retirement accounts that are free from personal taxes.Also assume that Google's current pre-tax WACC is 14%.If Google were to issue sufficient debt at a pre-tax cost of 7% to give them a debt to value ratio of 0.5,then the Google's after-tax WACC would be closest to:

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Quizplus · Accepted Answer

B)r_WACC= 11ea7cce_3cdf_5df8_928c_579f6f25e135_TB1626_00 r_{e +} 11ea7cce_3cdf_5df9_928c_ad276e1a0aac_TB1626_00 r_{d -} 11ea7cce_3cdf_850a_928c_ef380862f792_TB1626_00 r_dT_c= 14% - 11ea7cce_3cdf_850b_928c_49c6f6dbb222_TB1626_11 (7%)(35%)= 12.775% Note that = 11ea7cce_3cdf_850c_928c_e3d2af2a79ff_TB1626_11 r_{e +} 11ea7cce_3cdf_ac1d_928c_dbde37e89bb3_TB1626_11 r_d is the pre-tax WACC.

Assume That Investors Hold Google Stock in Retirement Accounts That