Consider an enterprise with a capital structure consisting of 70 debit and 30quity. if you use the costs of debt and equity of the company from questions 6 and 7, 6.5% by the company’s WACC.
WACC = Weight of debt * Cost of debt + Weight of equity * Cost of Equity
WACC = 70% * 5% + 30% * 10%
WACC = 3.5% + 3%
WACC = 6.5%.
The weighted average cost of capital represents the average cost of attracting an investor, whether that investor is a bondholder or a shareholder. This calculation weights the cost of capital according to the debt and equity used by the WACC company. This presents a clear hurdle for internal projects or potential acquisitions.
Learn more about WACC at
https://brainly.com/question/25566972
#SPJ4
