Wentworth's Five and Dime Store has a cost of equity of 11.1 percent. The company has...

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Question

Wentworths Five and Dime Store has a cost of equity of 11.1 percent. The company has an aftertax cost of debt of 4.7 percent

Answer 1

Answer #1

Debt-equity ratio=debt/equity

Hence debt=0.71*equity

Let equity be $x

Debt=$0.71x

Total=$1.71x

WACC=Respective costs*Respective weight

=(x/1.71x*11.1)+(0.71x/1.71x*4.7)

=8.44%(Approx).

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Answer 2

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