Explore BrainMass
Share

Weighted Average Cost of Capital

This content was STOLEN from BrainMass.com - View the original, and get the solution, here!

If Firm X has a 28% cost of equity and a 10% before tax cost of debt capital. The firm's debt to equity ratio is 2. Firm X is interested in investing in a telecom project. The corporate tax rate is 35%. What is the weighted average cost of capital for Firm X?

Please include formulas and work process so I can understand where the answer came from.

© BrainMass Inc. brainmass.com September 22, 2018, 9:34 am ad1c9bdddf - https://brainmass.com/business/weighted-average-cost-of-capital/weighted-average-cost-capital-233105

Solution Preview

Please see attached file:

If Firm X has a 28% cost of equity and a 10% before tax cost of debt capital.  The firm's debt to equity ratio is 2.  Firm X is interested in investing in a telecom project. The corporate tax rate is 35%. What is the weighted average cost of capital for Firm X?

Step 1: Calculate the proportions ...

Solution Summary

Computes Weighted Average Cost of Capital (WACC) for a firm.

$2.19