Explore BrainMass

WACC and debt-equity ratios

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.

Solution Preview

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

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

Solution Summary

The solution explains how to calculate the WACC.