Taxes and WACC. Rainbow in the dark manufacturing has a target debt equity ratio of .65 its cost of 13 %, and its cost of debt is 8 %. if the tax rate is 35 %. What is the companys WACC?
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Expert's answer
2013-01-30T08:31:08-0500
The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. WACC = Ks х Ws + Kd х Wd х ( 1 - T ) WACC = 0.65*0.13 + 0.65*0.08*(1 - 0.35) = 0.1183 = 11.83%
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