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You are given the following equation first in words followed by the same equation written in symbols:Words:The Weighted Average Cost of Capital (WACC) equals [(Debt
You are given the following equation first in words followed by the same equation written in symbols:Words:The Weighted Average Cost of Capital (WACC) equals [(Debt divided by Assets) Times ((Cost of Debt) Times (1 minus the Tax Rate))] Plus ((Equity divided by Assets) Times (Cost of Equity))Symbols:WACC= [(Debt/Assets) X ((Cost of Debt) X (1 Tax Rate))] +[(Equity/Assets) X (Cost of Equity)]The target debt equity ratio for the Corporation is 25%, the cost of debt is 8%, the cost of equity is 15%, and the tax rate is 20%. What is the Weighted Average Cost of Capital (WACC) (rounded to the nearest one tenth of one percent? A 5.75%. B. 9.3%. C. 11.5%. D. 13.3%
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