You are the CFO of a major manufacturer, and you are reviewing a report recently completed by a new financial analyst. You note that the weighted average cost of capital (WACC) was used in part of the analysis.

In the report, the analyst had gathered the following inputs:

Dividend yield 0.03 Forward P/E 15

Tax rate 0.25 Trailing P/E 16

Net profit margin 0.10 Debt/equity ratio 0.75

Risk-free rate 0.02 Total asset turnover 5.25

The analyst used the following formula to estimate the WACC:

WACC = (weight for debt)*(cost of debt) + (weight for equity)*(cost of equity)

0.0775 = (0.75)*(0.08) + (0.25)*(.07)

Identify and correct any potential errors in the analysts WACC calculation.