Problem:
Smyrna Inc., has a target capital structure of 70% common stock and 30% debt. Its cost of equity is 14%, and before-tax cost of debt is 7.5%. The relevant tax rate is 35%.
Required:
Question: What is the Smyrna's WACC?
- 14%
- 7.50%
- 12.05%
- 10.76%
- 11.26%
Note: Show all workings.