To find the weighted average cost of capital (WACC), you will need to calculate the cost of equity and the after-tax cost of debt and then use those values to weight the costs based on the proportion of debt and equity in the company's capital structure.
The cost of equity can be calculated using the capital asset pricing model (CAPM), which is:
Cost of equity = Risk-free rate + Beta * (Market risk premium)
Since you have the cost of equity already given as 11.2%, you can use that value.
The after-tax cost of debt is calculated as:
After-tax cost of debt = (1 - Tax rate) * YTM on bonds
Plugging in the values you have given, this is:
After-tax cost of debt = (1 - 0.21) * 5.8% = 4.58%
The WACC is then calculated as:
WACC = (Cost of equity * Weight of equity) + (After-tax cost of debt * Weight of debt)
The weight of equity is calculated as 1 - Debt-equity ratio, or 1 - 0.47 = 0.53. The weight of debt is the debt-equity ratio, or 0.47.
Plugging these values into the formula, the WACC is:
WACC = (11.2% * 0.53) + (4.58% * 0.47) = 6.01%
Based on this calculation, the correct answer is 6.01%, which is option D: 5.99%.