Calculate Weighted average cost of capital

Tax rate=40%

WACC=(1 tax rate) x (debt rate) x (debtto value)] + [(equity rate) x (equity to value)

answer should be around 10%

Ms. Alma Serah is planning to leverage equity capital with debt during the years 2022, 2023 and 2024. She is keen to know whether ALMA.com will add economic value. Therefore, in order to assess the effects of its leveraging debt strategy, ALMA.com prepared a projected Statement of Financial Position (Balance Sheet) and Income Statement for the years 2022, 2023 and 2024 based on certain assumptions and events that are likely to happen in the future. The interest rate on capital lease is 5%. The average expected interest rate on the bank loan during 2022 - 2024 is 4%. For long-term debt, the real interest rate is estimated to be 3%; the inflation premium is 4%; and ALMA.com's default/liquidity risk premium over government bonds is estimated to be 5%. The cost of common equity was estimated using the risk-free long-term government bond rate plus investment risk premium of 5.8%. The income tax rate = 40%. Following are the projected statements of income and financial position for 2022, 2023 and 2024: Alma.com Projected Statement of Income (2022 - 2024) INCOME STATEMENT 2022 2023 2024 Revenues $3.44M $7.50M $12.30M Cost of Goods Sold 2.55 5.20 8.72 Gross Profit 0.89 3.30 3.58 General and Marketing Expenses 0.26 0.34 0.36 Research and Development 0.05 0.05 0.05 Depreciation 0.06 0.09 0.12 EBIT 0.57 1.87 3.05 Interest Expense 0.07 0.11 0.18 EBT 0.50 1.76 2.87 Income Taxes 0.20 0.70 1.15 Net Income (Loss) 0.30 1.06 1.72 Alma.com Projected Statement of Financial Position (2022 - 2024) BALANCE SHEET 2022 2023 2024 Cash $ 1.15 M $ 1.87 M $ 3.95 M Accounts Receivable 0.35 1.00 1.50 Inventories 0.50 0.48 1.40 Total Current Assets 2.00 3.35 6.85 Net fixed assets* 0.15 0.35 0.57 Total Assets 2.15 3.70 7.42 Accounts payable 0.44 0.59 1.13 Accrued Liabilities 0.16 0.38 0.52 Total Current Liabilities 0.60 0.97 1.65 Capital Lease Liability* 0.13 0.30 0.60 Bank Loan 0.12 0.45 0.70 Long-Term Debt 0.20 0.50 Total Non-Current Liabilities 0.45 1.25 2.80 Total Liabilities 1.05 2.22 4.45 Venture Capital 1.00 1.00 1.00 Additional Paid-in Capital 0 0.30 0 Retained Earnings 0.10 0.18 1.97 Total Equity 1.10 1.48 2.97 Total Liabilities and Equity 2.15 3.70 7.42 *Represents the capital lease of tools and equipment (warehouse facilities) 1.50 denna