# How do you calculate WACC given an optimal capital structure?

Not what you're looking for? Search our solutions OR ask your own Custom question.

A company has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Given the following information, calculate the firm's weighted average cost of capital.

rd = 6%

Tax rate = 40%

P0 = $25

Growth = 0%

D0 = $2.00

a. 6.0%

b. 6.2%

c. 7.0%

d. 7.2%

e. 8.0%

https://brainmass.com/business/weighted-average-cost-of-capital/116870

#### Solution Preview

WACC is the weighted average cost of capital and is calculated as below

WACC = proportion of debt X after tax cost of debt + proportion of equity X cost of equity

Here it is ...

#### Solution Summary

The solution shows how to calculate the WACC.

$2.49