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Go-Go Inc. is thinking about investing in a new project. The balance sheet reports that they...

Go-Go Inc. is thinking about investing in a new project. The balance sheet reports that they currently have $22 million worth of long-term debt and $18 million worth of common equity. Their current cost of debt is 4%. According to Yahoo.Finance.com the current required return to Go-Go's stock is 11%, the company has $2 million shares of stock outstanding and the stock currently trades for $32 per share. If their average tax rate is 34% and they have no preferred stock, what Go-Go's weighted average cost of capital?

9.21%

8.86%

6.40%

None of these

7.50%
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Answer #1

WACC-rd*1-t)wd+rs ws WACC-0.04 (1-0.34) (22/(18+22))+0.11 (18/(18+22)) WACC- rd cost of debt t- tax rate wd- weight of debt

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