Suppose that TapDance, Inc.’s, capital structure features 60 percent equity, 40

Question

Suppose that TapDance, Inc.’s, capital structure features 60 percent equity, 40 percent debt, and that its before-tax cost of debt is 9 percent, while its cost of equity is 14 percent. Assume the appropriate weighted average tax rate is 34 percent.

What will be TapDance’s WACC? (Round your answer to 2 decimal places.)

Suppose that TapDance, Inc.’s, capital structure features 60 percent equity, 40 percent debt, and that its before-tax cost of debt is 9 percent, while its cost of equity is 14 percent. Assume the appropriate weighted average tax rate is 34 percent.

Explanation / Answer

WACC = 0.60 × 14% + 0.40 × 9% × (1 – 0.34)

WACC = 10.78%

TapDance’s WACC will be 10.78%.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.