Problem:
Sixx AM Manufacturing has a target (market value) debt-equity ratio of 0.59. Its cost of equity is 21 percent, and its cost of debt is 10 percent. If the tax rate is 33 percent, what is the company's WACC?
You need to convert the D-E ratio into the capital structure weights before you can use the WACC equation.
- 16.48%
- 12.56%
- 14.91%
- 12.01%
- 15.69%
Note: Explain all calculation and formulas.