Business, 07.12.2019 03:31 DjPeaceQueen

The five and dime store has a cost of equity of 14.8 percent, a pretax cost of debt of 6.7 percent, and a tax rate of 34 percent. what is the firm's weighted average cost of capital if the debt-equity ratio is .46?

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Answer from: elijah1090

WACC = Ke(E/V) + Kd(D/V)

WACC = 14.8(100/146) + 6.7(46/146)(1-0.34)

WACC = 10.1370 + 1.3932

WACC = 11.53%

Explanation: The weighted average cost of capital of the firm is a function of cost of equity and the proportion of equity to the value of the firm plus after-tax cost of debt and the proportion that debt bears to the value of the firm. The deb t-equity ratio is 0.46(46/100), which implies that debt is 46 while equity is 100. The total value of the company is 146.

Answer from: Quest

this is all on your opinion. you choose what you want to do.

Answer from: Quest

answerboth the short run phillips curve and the aggregate demand and aggregate supply model

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