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      Question

      A company has debt of ₹50 lakh at 10% interest, equity

      of ₹1 crore with cost of equity 15%, and tax rate 30%. Calculate the WACC (weighted by market values).
      A 9% Correct Answer Incorrect Answer
      B 13% Correct Answer Incorrect Answer
      C 14% Correct Answer Incorrect Answer
      D 11% Correct Answer Incorrect Answer
      E 10% Correct Answer Incorrect Answer

      Solution

      • After-tax cost of debt = 10% × (1 – 0.3) = 7%. • WACC = [50/(50+100) × 7%] + [100/(50+100) × 15%] = 2.33% + 10% = 13%.

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