Answer: 9.9%
Explanation:
The Weighted Average Cost of Capital (WACC) represents the cost of financing the business through debt and capital.
It is calculated as;
= (Weight of stock * cost of stock) + ( Weight of debt * after-tax cost of debt)
After tax cost of debt;
= debt interest * ( 1 - tax rate)
= 10% * ( 1 - 35%)
= 6.5%
WACC = (40% * 15%) + ( 60% * 6.5%)
= 9.9%
