Question

WACC.  

Eric has another​ get-rich-quick idea, but needs funding to support it. He chooses an​ all-debt funding scenario.


He will borrow ​$4 comma 911 from​ Wendy, who will charge him 4​% on the loan.


He will also borrow ​$4 comma 305 from​ Bebe, who will charge him 6​% on the​ loan, and ​$2 comma 784 from​ Shelly, who will charge him 12​% on the loan.


What is the weighted average cost of capital for​ Eric?

Answer 1

6.57%

Step-by-step explanation:

The WACC formula is really easy you just have to calculate the weights of the debt or equity whatever is given in the question and then multiply it by the percentage of borrowing given. The total borrowing in this question is 12000(4911+4305+2784).

WACC for this question will be calculated as:

=> (4911/12000)*0.04 + (4305/12000)*0.06 + (2784/12000)*0.12

=> 0.0657

=> 6.57%

Hope this helps,

Goodluck buddy