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Weintraub Electronics wants to expand to a new market segment with their ActiveWear wireless earphones. The cost of the R5 mi

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Answer #1

WACC is the weighed average of the individual component's cost of capital

a)

WACC (equity) = (1.5/2.5)*13% + (1/2.5)*10%

WACC (equity) = 11.8%

b)

WACC (debt) = 0.5*11% + 0.5*14%

WACC (debt) = 12.5%

c)

WACC (total) = (3/4)*12.5% + (1/4)*11.8%

WACC (total) = 12.325%

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