Answer:
33.33%
Explanation:
WACC can be calculated using the following formula:
WACC = Ke * (E/V) + Kd(1-T) * (D/V)
Here
V = Market Value of Equity + Market Value of Debt
Or simple we can write it as:
V = E + D
kd(1-T) is after tax cost of debt which is given in the question and is 6%.
Ke = 9% cost of equity
WACC = 9%
So by putting values we have:
9% = 11% * (E/V) + 6% * (D/V)
Which means:
0.09 = 0.11(E/V) + 0.06(D/V)
By multiplying by (V/E), we have:
0.09(V/E) = 0.11 + 0.06(D/E)
As we know that the V/E is just the equity multiplier, which is equal to:
V/E = 1 + D/E
So by putting value we have:
0.09(D/E + 1) = 0.11 + 0.06(D/E)
Now, we can solve for D/E as:
0.09(D/E) + 0.09 = 0.11 + 0.06(D/E)
0.09(D/E) - 0.06(D/E) = 0.11 - 0.09
0.03(D/E) = 0.03
(D/E) = 0.02 / 0.03 = 33.33%
