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

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

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