Question

the cost of capital for a firm with a 60/40 debt/equity split, 5.22% cost of debt, 15% cost of equity, and a 35% tax rate would be

Answer 1

8.04% is the cost of capital for a firm for the given question including the and a 35% tax rate

Cost of debt * (1 - Tax%) =

Cost of capital of firm Weight of equity = 5.22% * (1 - 35%) * Weight of debt + Cost of equity * 60% + 15% * 40%

= 8.04%

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