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Capital Structure, the cost of capital, and stock price WACC = Wd (ra) (1-T) + Ws (rs) T = 0.40 0.06 0.10 Capital Structure (Debt/Assets

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Capital Structure, the cost of capital, and stock price WACC = Wd (ra) (1-T) + Ws (rs) T = 0.40 0.06 0.10 Capital Structure (Debt/Assets = Wd) rd D/E Beta rs WACC Value 10% 1.60 0.2500 30% 40% 8.0% 8.3% 9.0% 10.0% 12.0% 1.0000 Capital Structure, the cost of capital, and stock price WACC = Wd (ra) (1-T) + Ws (rs) T = 0.40 0.06 0.10 Capital Structure (Debt/Assets = Wd) rd D/E Beta rs WACC Value 10% 1.60 0.2500 30% 40% 8.0% 8.3% 9.0% 10.0% 12.0% 1.0000

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