Homework Answers
WACC is calculated by using the formula below:
WACC= wd*kd(1-t)+we*ke
Where:
WACC is calculated by using the formula below:
WACC= wd*kd(1-t)+we*ke
Where:
Wd=percentage of debt in the capital structure
We=percentage of equity in the capital structure
Kd=cost of debt
Ke=cost of equity
t= tax rate
=percentage of debt in the capital structure
We=percentage of equity in the capital structure
Kd=cost of debt
Ke=cost of equity
t= tax rate
WACC= 0.40*9.50%*(1 -0.40) + 0.60*16%
= 2.28% + 9.60%
= 10.88%.
In case of any query, kindly comment on the solution.
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