Precision Cuts has a target debt-equity ratio of .48. Its cost of equity is 16.4 percent,...
Precision Cuts has a target debt-equity ratio of .48. Its cost of equity is 16.4 percent, and its pretax cost of debt is 8.2 percent. If the tax rate is 34 percent, what is the company's WACC?
11.28 percent
13.20 percent
12.91 percent
11.72 percent
12.84 percent
Homework Answers
| WACC = Wd×Rd+We×Ke+Wp×Kp | ||
| W is weights of respective portfolios | ||
| R is return on respective portfolios | ||
| WACC | 12.84% | 8.2%*(1-34%)*0.48/1.48+16.4%*1/1.48 |
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