All the options are wrong. Correct answer is 15.47% as worked out below:
1] | After tax cost of debt = Before tax cost*(1-t) = 0.12*(1-32%) = | 8.16% |
2] | Weight of debt = 0.62/1.62 = | 38.27% |
Weight of equity = 1-weight of debt = 1-38.27% = | 61.73% | |
or 1/1.62 = | 61.73% | |
3] | WACC = Cost of debt*Weight of debt+Cost of equity*Weight of equity = 8.16%*38.27%+20%*61.73% = | 15.47% |
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