Homework Answers
HI
As per policy, we will solve only top most question here.
2) Here Debt equity ratio D/E = 0.6
V/D = (D+E)/D = 1+ E/D
= 1+ 1/0.6
= 2.67
D/V = 0.375
E/V = 1-D/V = 0.625
cost of equity ke= 14%
cost of debt kd = 8%
tax rate t = 38%
WACC = E/V*ke + D/V*kd*(1-38%)
= 0.625*14 + 0.375*8*0.62
= 10.61%
Thanks
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