Percy's Wholesale Supply has earnings before interest and taxes of $106,000. Both the book and the market value of debt is $170,000. The unlevered cost of equity is 15.5 percent while the pre-tax cost of debt is 8.6 percent. The tax rate is 38 percent. What is the firm's weighted average cost of capita?
I believe the answer to be 13.45% however if you could break down the steps and denote the meaning of what i'm solving at each step that would be very appreciated!
The firm's weighted average cost of capital = Weight of debt * After tax cost... View the full answer