Question

The company cost of capital, after tax, for a firm with a 65/35 debt/equity split, 8% cost of debt, 15% cost of equity, and a 35% tax rate would be:

Answer 1

Answer:

10.45%

Step-by-step explanation:

Calculation for W.A.C.C.( Weighted avg. cost of capital)

Cost of Equity given = 15%

Cost of debt after tax given = 8%

Weight is 65% debt and 35% equity.

Capital  Weight  Cost  WACC

Equity  0.35      15%        0.0525

Debt    0.65        8%             0.052

Total                                 0.1045

WACC = 10.45%

10.45%