Question
A company has the following capital structure:
• Equity: ₹60,00,000 (Cost of Equity = 15%) • Debt: ₹40,00,000 (Pre-tax cost = 10%) • Tax rate = 30% Calculate WACC.Solution
WACC = (E/V × Ke) + (D/V × Kd × (1 – T)) = (60/100 × 15%) + (40/100 × 10% × 0.7) = 9% + 2.8% = 11.8%
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