Calculate the weighted average cost of capital (WACC)based on the following information: the capital structure weights are 50% debt and 50% equity; the interest rate on debt is 10%; the required return to equity holders is 20%; and the tax rate is 30%.

Question

Quizplus · Accepted Answer

WACC = (Weight of Debt × Cost of Debt) + (Weight of Equity × Cost of Equity)
= (0.5 × 0.1 × (1-0.3)) + (0.5 × 0.2)
= 0.035 + 0.1
= 0.135 or 13.5%

Calculate the Weighted Average Cost of Capital (WACC)based on the Following