A company has a market value of $500 million.
It has a market value of equity of $200 million, a market
value of long term debt of $150 million.
The cost of equity is 12%, the cost of long term debt is 8%, and the cost of short term debt is 6%. The marginal tax rate is 35%.
what is the weighted average pre tax cost of capital (WACC) for this company?
The answer is 8.37%, what is the mathematical equation used to get the 8.37% answer?