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      Question

      A firm has EBIT of ₹10 lakh, tax rate 30%, cost of

      equity 15%, and cost of debt 10%. It has 50% debt and 50% equity. Calculate WACC (assuming book values = market values).
      A 11.5% Correct Answer Incorrect Answer
      B 12.0% Correct Answer Incorrect Answer
      C 11.0% Correct Answer Incorrect Answer
      D 12.5% Correct Answer Incorrect Answer
      E 10.5% Correct Answer Incorrect Answer

      Solution

      WACC = Ke × E/V + Kd × (1−T) × D/V = 15% × 0.5 + 10% × (1−0.3) × 0.5 = 7.5% + 3.5% = 11%.

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