Let weight of debt be X
Weight of equity be 1 - X
Year 1 dividend = 3.25 (1 + 7%) = 3.4775
Cost of equity = (D1 / price) + growth rate
Cost of equity = (3.4775 / 25.75) + 0.07
Cost of equity = 0.135049 + 0.07
Cost of equity = 0.205049 or 20.5049%
WACC = Weights * costs
0.1455 = X*0.09*(1 - 0.35) + (1 - X)*0.205049
0.1455 = X0.0585 + 0.205049 - X0.205049
X0.146549 = 0.059549
X = 0.4063 or 40.63%
Therefore, percentage of debt is 40.63%
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