Name 3 ways lowering the corporate tax rate affects a DCF. What's the net effect?

Answer

(1) Lower cash taxes → higher UFCF → higher EV (positive); (2) Smaller debt tax shield → effective cost of debt rises → WACC rises → lower EV (negative); (3) Cost of equity rises slightly (Hamada effect: higher levered beta with a lower tax rate) → WACC rises → lower EV (negative). The net effect is ambiguous — it depends on leverage and the size of the rate change.