Corporate Finance Q69

69The following data is available for a company:
Cost of debt: 9%
Cost of equity: 12%
Debt-to-equity ratio (D/E): 100%
Tax rate: 30%
The weighted average cost of capital (WACC) is closest to:

Option : C
Explanation : Wd = (D/E) / (1 + D/E) = 1 / (1 + 1) = 50% We = 1 - Wd = 50% WACC = Wd Rd (1 - t) + We Re WACC = 50% * 9% * (1 - 30%) + 50% * 12% = 9.15%

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