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Part I. Given the tax rate of 40% of this corporation, calculate its after-tax weighted average cost of capital (WACC) for Duke Corporation.
Table: the before-tax weighted average cost of capital (WACC) for Duke Corporation
Source of Capital Weight (1) Cost (2) Weighted Cost (1) X (2)
Long-Term Debt .4 5.6% 2.24%
Preferred Stock .1 10.6% 1.06%
Common Stock Equity .5 13% 6.5%
Totals 1 - 9.8%
Part II. Answer true, false or uncertain and explain briefly on the following statement. "the after-tax wacc cannot ever be higher than the before-tax wacc."
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