📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!

    âš¡ Month End Offer - Flat 52% Off On All Courses! Enroll Now âš¡
    00:00:00 AM Left

    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%

    Practice Next
    More Cost of Capital and Business Valuations Questions

    Relevant for Exams:

    ask-question