Caddie Manufacturing has a target debt-equity ratio of .45. Its cost of equity is 11 percent,...
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Caddie Manufacturing has a target debt-equity ratio of .45. Its cost of equity is 11 percent, and its pretax cost of debt is 6 percent. If the tax rate is 25 percent, what is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
Homework Answers
The target debt-equity ratio is 0.45.
Debt proportion is calculated below:
Thus, equity proportion will be:
The formula to calculate WACC is given below:
WACC is 8.98%.
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Caddie Manufacturing has a target debt-equity ratio of .45. Its
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