Answer:
12.85%
Explanation:
WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs.
As have the cost of capital, we need to calculate the cost of equity.
0.46 Debt to equity ratio means the debt is 0.46 and Equity is 1
Cost of Capital = (Cost of Equity x Weightage of equity) + (Cost of Debt x Weightage of Debt)
11.1% = (Cost of Equity x 1 / 1.46) + (7.3% x 0.46/1.46)
11.1% = (Cost of Equity x 1 / 1.46) + (7.3% x 0.46/1.46)
11.1% = (Cost of Equity x 1 / 1.46) + 2.30%
11.1% - 2.3% = Cost of Equity x 1 / 1.46
8.8% = Cost of Equity x 1 / 1.46
Cost of Equity = 8.8% x 1.46
Cost of Equity = 12.85%
