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Hi Sir,
Bpp question 46 Duo company part a
I got 11% as my discount rate
This is how I calculated:
(0.80*0.11)+(0.14*0.086)=0.10004
therefore, wacc = 0.1004/0.94=10.6%So will I lose mark if there’s a slight difference?
Yes you would lose marks, because you answer is wrong.
The cost of equity is 11% (from the question).
The cost of debt is 0.7 x 8.6% = 6.02%
Therefore the WACC is (0.8 x 11) + (0.2 x 6.02) = 10%
What have you weighted them by 0.80 and 0.14? The question tells you that it is 0.8 and 0.2.
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