Suppose beta is 1.2, risk free rate is 3%, market risk premium is 5%, before tax cost of debt is 6%, tax rate is 40%, and the firm's debt to equity ratio is 0.5, what is WACC?

Cost of Equity = Risk-free Rate + beta * Market Risk Premium Cost of Equity = 3% + 1.2 * 5% = 9.00%

WACC = Weight of Debt * Before-tax Cost of Debt * (1 - tax) + Weight of Equity * Cost of Equity WACC = (0.5/1.5) * 6% * (1 - 0.40) + (1.0/1.5) * 9% = 7.20%

In the WACC formula where did 1.5 and 1.0 come from?