Answer:
0.4766
Explanation:
Given:
WACC = 9.7%
Company’s cost of equity = 12%
Pretax cost of debt = 7.5%
Tax rate = 35%
Now,
WACC
= Weight × Cost of equity + (1 - weight) × Pretax cost of debt × (1-tax rate)
or
0.097 = weight × 0.12 + ( 1 - weight ) × 0.075 × (1 - 0.35)
or
0.097 = 0.12 × weight + 0.04875 - 0.04875 × weight
or
0.04825 = 0.07125 × weight
or
weight = 0.6772
also,
weight =
or
=
or
=
+ 1
or
1.4766 = + 1
or
= 0.4766
The compound interest amount after 5 years be $6,083.26.
<h3>What is compound interest?</h3>
Compound interest, also known as interest on principal and interest, is the practice of adding interest to the principal amount of a loan or deposit.
Compound interest is when you receive interest on both your interest income and your savings.
If this value was compounded in 5 years, then we are going to utilize the compound interest formula to solve it.
Where A be the amount accumulated for the entire period.
p be the Money invested
r be the Interest rate per year
n be the period the money was invested.
The exponential function is
= 5000 1.216652902
= 6,083.264512
The amount after 5 years be $6,083.26
The compound interest amount after 5 years be $6,083.26.
To learn more about compound interest refer to:
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