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Suppose you ran a business, your tax rate was 21%, the CAPM model said that the required return on equity capital was 17% and you are issuing a bonds with a 4% coupon. 60% of your capital to be used for
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Suppose you ran a business, your tax rate was 21%, the CAPM model said that the required return on equity capital was 17% and you are issuing a bonds with a 4% coupon. 60% of your capital to be used for investments is equity and the remaining 40% is debt arising from the bond issue. What is your WACC?

User Rakeem
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4 votes

Answer:

11.46

Step-by-step explanation:

WACC = weight of equity x cost of equity + weight of debt x cost of debt x (1 - tax rate)

(17% x 0.6) + (0.4 x 4 x (1 - 0.21) = 11.46%

User Alexxio
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