Raceway Products Has a Market Debt-To-Equity Ratio of

question 12

Essay

Raceway Products has a market debt-to-equity ratio of .60,a corporate tax rate of 21%,and pays 8% interest on its debt.The interest tax shield on Raceway's debt lowers its WACC by what amount?

---

Definitions:

Index Model

A statistical model to estimate the returns of a stock based on the returns of a broader market index.

Covariance

A measure of the degree to which two variables move together. In finance, it is used to measure how returns on two assets are related.

Regression Analysis

A statistical method used to examine the relationship between one dependent variable and one or more independent variables.

Slope

In mathematics and economics, the slope represents the rate at which a variable changes in relation to another variable, often depicted as the rise over run on a graph.