# Calculating WACC at different capital structures

Not what you're looking for?

Chandeliers Corp. has no debt but can borrow at 7.9 percent. The firm's WACC is currently 9.7 percent, and the tax rate is 35 percent.

a. What is the company's cost of equity?

b. If the firm converts to 35 percent debt, what will its cost of equity be?

c. If the firm converts to 50 percent debt, what will its cost of equity be?

d.

d-1. If the firm converts to 35 percent debt, what is the company's WACC?

d-2. If the firm converts to 50 percent debt, what is the company's WACC?

##### Purchase this Solution

##### Solution Summary

Solution depicts the steps to calculate WACC at different capital structures.

##### Solution Preview

a.

What is the company's cost of equity?

In absence of any debt, Cost of equity =WACC=9.70%

b.

If the firm converts to 35 percent debt, what will its cost of equity be?

Tax Rate=35%

Debt=D=35%

Equity=E=1-D=1-15%=65%

Cost of debt=rd=7.90%

Cost of equity without debt=ro=9.70% ...

###### Education

- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India

###### Recent Feedback

- "Thank you"
- "Really great step by step solution"
- "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
- "Thanks Again! This is totally a great service!"
- "Thank you so much for your help!"

##### Purchase this Solution

##### Free BrainMass Quizzes

##### Geometry - Real Life Application Problems

Understanding of how geometry applies to in real-world contexts

##### Probability Quiz

Some questions on probability

##### Know Your Linear Equations

Each question is a choice-summary multiple choice question that will present you with a linear equation and then make 4 statements about that equation. You must determine which of the 4 statements are true (if any) in regards to the equation.

##### Exponential Expressions

In this quiz, you will have a chance to practice basic terminology of exponential expressions and how to evaluate them.

##### Solving quadratic inequalities

This quiz test you on how well you are familiar with solving quadratic inequalities.