Question

Sixx AM Manufacturing has a target debt--equity ratio of 0.56. Its cost of equity 15 percent, and its cost of debt is 11 percent. If the tax rate is 32 percent, what is the company's WACC

Answer 1

12.3%

Step-by-step explanation:

Calculation for what is the company's WACC

WACC = 0.15(1/1.56) + 0.11(0.56/1.56)(1 - 0.32)

WACC=0.15(0.64)+0.11(0.36)(0.68)

WACC=0.096+0.026928

WACC= 0.123*100

WACC=12.3%

Therefore the company's WACC will be 12.3%