Given are the following data: Cost of debt = r_D = 6%; Cost of equity = r_E = 12.1%; Marginal tax rate = 35%; and the firm has 50 percent debt and 50 percent equity.Calculate the after-tax weighted average cost of capital (WACC). A)8 percent B)7.1 percent C)9 percent D)5.9 percent

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Quizplus · Accepted Answer

The after-tax WACC is calculated as:WACC = (rD * (1 - T) * D) + (rE * E)= (0.06 * (1 - 0.35) * 0.5) + (0.121 * 0.5)= 0.08

Given Are the Following Data: Cost of Debt = RD

Given Are the Following Data: Cost of Debt = R_D