Equity dollars of financing, business and finance homework help

The weighted average cost of capital formula (WACC) shown below is the accepted method of computing a firm’s cost of capital.

WACCadj = 
E x Re + PS x Rps + D x Rd X (1 – Tc)     V V V 

Where: 

E = Equity dollars of financing 

PS = Preferred Stock dollars of financing 

D = Debt (bond) dollars of financing 

V = Total financing = E +PS +D 

Re = % Cost of Common Stock 

Rps = % Cost of Preferred Stock 

Rd = % Cost of Debt after tax 

Tc = Effective tax rate 

After reviewing this formula, your reading assignments and the instructor’s PowerPoint presentation, in a one paragraph posting, answer the following questions and provide a short supporting rationale for each answer. The answer does not require a quantitative solution What impact will the following company actions have on the company’s weighted average cost of capital (WACC): 

1. An Increase in the company’s corporate tax rate? 

2. An Increase in the company’s flotation cost? 

3. An increase in the company’s dividend? 

Can you demonstrate your answer mathematically?

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