hard · CFA Level I corp
Westfork Bancorp is calculating its Weighted Average Cost of Capital (WACC). The firm has a target debt-to-equity ratio of 0.60. The before-tax cost of debt is 8%, the cost of equity is 15%, and the marginal tax rate is 25%.
What is the weight of debt (w_d) that should be used in the WACC calculation?
- 60.0%
- 40.0%
- 37.5%
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