Northwest Territories Holding Corporation is comprised of two different divisions: car rental and furniture manufacturing.Two-thirds of the company's business comes from the furniture manufacturing division and the balance from the car rental division.The WACC for the car rental division is 9% and for the furniture manufacturing division is 15%.What would happen if the company used the overall WACC in the valuation of the following independent projects?
Definitions:
Regressive
A characteristic of a tax system where the tax rate decreases as the taxable amount increases.
Tax Cuts
Reductions in the amount of taxes imposed by a government on its citizens, often aimed at stimulating economic growth or achieving specific policy objectives.
Progressive Taxes
Taxation that takes a larger percentage of income from high-income earners than from low-income earners, aimed at reducing income inequality.
Ability-To-Pay Principle
The concept that taxes should be levied according to an individual's or entity's ability to bear them, typically resulting in higher earners paying more taxes.
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