Problem:
A firm's target capital structure consists of 10% debt and 90% common equity. It's tax rate = 40%; rd = 6.5%; and rs = 9.5%.
Required:
Question: Assuming that the firm will not be issuing new stock, what is its WACC?
- 8.94%
- 10.33%
- 8.25%
- 9.50%
- 6.50%
Note: Solve the problem and show all work.