Answer on Finance Question for Xiu
proportion of shareholders' equity and debt used to finance a company's assets:
D/E = Debt(liabilities)/equity.
WACC = (Debt / (Debt + Equity)) * Cost of
Debt + (Equity / (Debt + Equity)) * Cost of Equity
Cost of Debt =
After-tax Cost of Debt / (1- Tax Rate) = 0.058/(1-0.34) = 0.088 or
D/E = 1.5.
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