Wentworth's Five and Dime Store has a cost of equity of 11.5 percent. The company has...
Wentworth's Five and Dime Store has a cost of equity of 11.5 percent. The company has an aftertax cost of debt of 5.1 percent, and the tax rate is 39 percent. If the company's debt–equity ratio is .75, what is the weighted average cost of capital?
Homework Answers
Debt/Equity = 0.75
= 75/100
Hence total value = 75+100 = 175
WACC = Weight of equity * Cost of equity + Weight of debt * cost of debt after tax
= (100/175)*11.5%+ (75/175)*5.1%
=8.76%
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