Benjamin Manufacturing has a target debt-equity ratio of .63. Its cost of equity

Question

Benjamin Manufacturing has a target debt-equity ratio of .63. Its cost of equity is 14.7 percent, and its cost of debt is 9.7 percent.

If the tax rate is 30 percent, what is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

WACC ????

If the tax rate is 30 percent, what is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

WACC ????

Explanation / Answer

WACC = Weight of Debt*After Tax Cost of Debt + Weight of Equity*Cost of Equity

= 9.7*0.63/(1+ 0.63) *(1- 0.30) + 14.7*1/(0.63 +1) = 11.64%

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