WACC(Kc) | 15% | |
Cost of debt(Kd) | 8% | |
After tax cost of debt | 0.08*(1-0.2) | 6.40% |
Debt to Asset ratio | 0.3 | |
Therefore, | ||
Weight of Debt(Wd) | 30% | |
Weight of Equity(We) | 70% | |
Cost of equity | Ke | |
We know that, | ||
WACC= | Kc*(1-tax rate)*Wd + Ke*We | |
15= | 6.4*.30 + Ke *0.70 | |
Ke= | 18.69% or 0.1869 |
Therefore, none of the anwers.
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