XYZ Corporation's capital structure consists of 60% debt with a pretax cost of 10%,and the balance by common equity,with a cost of 15%.The company's marginal tax rate (federal and state combined)is 50%.XYZ's weighted-average cost of capital (WACC)is:

Question

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The WACC is calculated as follows: WACC = (E/V) * Re + (D/V) * Rd * (1 - Tc), where E is equity, V is total value, Re is cost of equity, D is debt, Rd is cost of debt, and Tc is tax rate. Here, WACC = (0.4 * 15%) + (0.6 * 10% * (1 - 0.5)) = 6% + 3% = 9%.

XYZ Corporation's Capital Structure Consists of 60% Debt with a Pretax