Gaucho Services starts life with all-equity financing and a cost of equity of 14%. Suppose it refinances to the following market-value capital structure: Debt (D) 45% at ro = 9.5% Equity (E) 55% Use MM's proposition 2 to calculate the new cost of equity. Gaucho pays taxes at a marginal rate of T c = 40%. Calculate Gaucho's after-tax weighted-average cost of capital.

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Fringe Benefit Tax

Fringe benefits are in addition to the compensation that companies give to their employees. It is an additional benefit above the stated salary. It helps to keep the employees of the firm motivated as sometimes the only salary is not enough to retain the quality employees of the firm. There are different types of fringe benefits. Fringe benefits are given in both private as well as public enterprises.