Question

CoffeeCarts has a cost of equity of ​, has an effective cost of debt of ​, and is financed with equity and with debt. What is this​ firm's WACC?

Answer 1

Answer: 12.6%

Step-by-step explanation:

The Weighted Average Cost of Capital like the term suggests , is the wieghted average cost of the various forms of capital used by a company including debt, equity and preferred equity.

Formula is;

= (Weight of equity* cost of equity) + (weight of debt * cost of debt)

= ( 15.5% * 0.75) + ( 3.9% * 0.25)

= 12.6%