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Alex Ar [27]
3 years ago
10

Croft Corporation has a target capital structure of 70 percent common stock and 30 percent debt. Its cost of equity is 16 percen

t, and the cost of debt is 8 percent. The relevant tax rate is 24 percent. What is the company's WACC
Business
1 answer:
Bezzdna [24]3 years ago
5 0

Answer:

13.02%

Explanation:

Debt = 30% and Common stock = 70%

Cost of equity is 16% and debt is 8%

Tax is 24%

WACC = Cost of equity*Weight of equity + After tax cost of debt*Weight of debt

WACC = (0.16*0.70) + (0.08*(1-0.24)*0.30)

WACC = 0.112 + 0.01824

WACC = 0.13024

WACC = 13.02%

So, the the company's WACC is 13.02%

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