Chubby Train Pty Ltd has a debt of $120,000 and the interest rate on the debt is 6.3% before tax. The taxation rate is 40%. As interest on debt is tax-deductible, the company's after-tax cost of debt capital is 3.78%. The market value of the company's equity capital is $180,000 and the return on investment is 7.5%.

What is WACC (Weighted Average Cost of Capital)?

a.

6.012%

b.

7.012%

c.

6.021%

d.

7.021%

e.

None of the above

Clear my choice