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WACC and debt-equity ratios

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Calculate the WACC for a firm with a debt-equity ratio of 1.5. The debt pays 6% interest and the equity is expected to return 8%. Assume a 35% tax rate and risk-free debt.

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The solution explains how to calculate the WACC.

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WACC = Proportion of debt X cost of Debt + Proportion of Equity X Cost of Equity

We use the Debt Equity ratio to get the ...

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