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how do i calculate the wacc when given in percentages. example
Debt/equity 30%
cost of equity 15.7%
Pre tax cost of debt 6.5%
Tax rate 25%
see june 2014 pass paper Q1 part 111please help me understand how the do the calculation
Debt : equity = 30% (0.3 : 1)
Meaning to say the total is 1.3
Then get the % of debt and equity portion and find out how much expected return of the debt and equity. The tax effect merely for debt portion because the tax on interest
when come to WACC =(1/1.3×15.7%)+[(0.3/1.3×6.5%) x (1-25%)] = 13.2%
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