Debt - Equity Ratio = 3
Weight of Debt, Wd= 3/(3+1)= 75%
Percentage of Equity. We= 1/(3+1)= 25%
Kd = 9%
Ke = 12%
t= 34%
WACC = Wd*Kd*(1-t)+We*Ke
= 75%*9%*66%+25%*12%
=4.46% + 3%
= 7.46%
2. A firm has a target debt-to-equity ratio of 3. Its cost of equity equals 12...
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