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Cost of capital for a firm

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The company cost of capital for a firm with a 60/40 debt/equity split, 8% cost of debt, 15% cost of equity, and a 35% tax rate would be:

A. 7.02%
B. 9.12%
C. 10.80%
D. 13.80%

I am calculating 7.02% but am unsure if I am inputing my number correctly.

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Solution Summary

Weighted Average Cost of Capital formula is used to calculate a company's cost of capital.

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We can use Weighted Average Cost of Capital (WACC) formula for the company cost of capital:

WACC = (E/V) * Re + (D/V) * Rd (1 - Tc)

Where:
Re = cost of equity, ...

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