equity is 145 percent and its pretax cost of debt is s s per

equity is 14.5 percent, and its pretax cost of debt is s s percent Tulloch Manufacturing has If the tax rate is 35 percent, WACC a target debt-equity ratio or 65. its cost of t, what is the company\'S WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 96

Solution

Debt-equity ratio=Debt/equity

Hence debt=0.65equity

Let equity be $x

Hence debt=$0.65x

Total=$1.65x

After tax cost of debt=9.5*(1-tax rate)

=9.5(1-0.35)=6.175%

WACC=Respective costs*Respective weight

=(x/1.65x*14.5)+(0.65x/1.65x*6.175)

which is equal to

=11.22%(Approx).