Suppose the current capital structure consist of following figures. Equity - 0.6 at Cost of...
Suppose the current capital structure consist of following figures.
Equity - 0.6 at Cost of equity (14%)
Long term Debt - 0.3 at concessionary rate of 8% (Pre tax)
Long term Debt - 0.1 at normal rate of 11% (Pre tax)
Tax rate is 28%
How to calculate WACC? (Do we have to take average rate of Debt, or consider debt items separately)
Homework Answers
Hello SIr/ Mam
We have to take both items seperately.
Given that:
Equity : 0.6 Ke = 14%
LT Debt : 0.3 Kd = 8%(1-0.28) = 5.76%
LT Debt : 0.1 Kd = 11%*(1-0.28) = 7.92%
Hence,
I hope this solves your doubt.
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