Given the following data for U&P Company: Debt (D) = $100 million; Equity (E) = $300 Million; rD = 6%; rE = 12% and TC = 30%.
Calculate the after-tax weighted average cost of capital (WACC):
A) 10.5%
B) 15%
C) 10.05%
D) 9.45%

Question

Quizplus · Accepted Answer

WACC = (D/(D+E) x rD x (1-TC)) + (E/(D+E) x rE)
WACC = (100/(100+300) x 6% x (1-30%)) + (300/(100+300) x 12%)
WACC = 0.028 x 0.7 + 0.084
WACC = 0.102 or 10.05%

Given the Following Data for U&P Company: Debt (D) =