WACC of company A is 12.50%. Cost of equity and pre-tax cost of debt are 13.5% and 8.8% respectively. Company pays tax at 35%. Find the target debt to equity ratio.
solved WACC = (After tax cost of debt*weight of debt) + (Cost of equity*weight of equity) but WACC is given =12.50% cost of... View the full answer
Sign up to view the full answer
Suppose to proportion of equity is x And proportion of debt is y or 1-x Wacc =( proportion of equity *cost of... View the full answer
Ke = COST of equity = 13.5 Ki = COST of debt = 8.80 * 0.65 = 5.72 Now WACC = Ke * % of equity + ki * %... View the full answer
Debt/Equity Let debt =X Equity =y X+Y =1 Y =1-X WACC =Weight of Equity * cost of Equity +... View the full answer