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please explain how the weight of debt is caculated below specially how the 2.5 was found in the problem? 27. Winston Company has a debt-to-equity
please explain how the weight of debt is caculated below specially how the 2.5 was found in the problem?
27. Winston Company has a debt-to-equity ratio of 1.5. Its WACC is 11%, and its cost of debt is 7%. The corporate tax rate is 35%. What is Winston Company's cost of equity? The equation for WACC is: E+D" +E+D"(1 - 7) The company has a debt-to-equity ratio of 1.5, which implies the weight of debt is 1.5/2.5, and the weight of equity is 1/2.5, so WACC -0.11 = (1/2.5) r,+(1.5/2.5)(0.07)(1 -0.35) rs = 0.2068 Step by Step Solution
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