Question

Miller Manufacturing has a target debt-equity ratio of .30. Its cost of equity is 12.5 percent and its cost of debt is 7.2 percent. If the tax rate is 25 percent, what is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Particulars Equity capital market value weights 77% cost of capital 12.50% weighted cost 9.62% Debt 23% 1.25% 5.40% 0.072*(1-0.25) 10.9% Weighted average cost of capital