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    Question

    If cost of equity is 15% with weight 1/3 and cost of debt is 10% with weight 2/3, calculate weighted average cost of capital. Rate of tax is 32%?

    A 12.27% Correct Answer Incorrect Answer
    B 11.67% Correct Answer Incorrect Answer
    C 9.53% Correct Answer Incorrect Answer
    D 7.93% Correct Answer Incorrect Answer
    E 7.13% Correct Answer Incorrect Answer

    Solution

    Weighted Average Cost of Capital (WACC) = [cost of equity * weight of equity] + [cost of debt *(1-tax rate) * weight of debt] = [15%*1/3] + [10%* (1-32%) * 2/3] = 5% + 4.53% = 9.53%

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