(Capital Structure weights). The required return on debt (before taxes) is 7.50%, the required return on equity is 15%, and the cost of capital is 10%. If the marginal income tax rate is 40%, what are the proportions of debt and equity financing?© BrainMass Inc. brainmass.com June 4, 2020, 12:45 am ad1c9bdddf
Cost of capital = proportion of debt X after tax cost of debt + proportion of equity X cost ...
The solution explains how to determine the proportions of debt and equity financing