Quote:
Originally Posted by rzajr21
Seems like I am not getting the right answer.
I have WACC = (85%)(1-65%)(264469/607629) + (15%)(343160/607629)
I get 32% I think my D/V and E/V numbers are skewed somewhere.
a few things..........
1) needs to be 3 steps not 2 steps. short-term and long-term debt are different cost.
2) (1-65%). assume there should be a decimal point in there. but also, it would be (1-0.35%) assuming you could do the debt all as one step.
3) MOST IMPORTANTLY, AND THE REASON YOUR ANSWER IS SO FAR OFF.... THE FIRST TERM ASSUMING YOU COULD DO THE DEBT ALL IN ONE STEP WOULD BE... 85% X 65% X PRE-TAX INTEREST COST. THAT 264469/607629 IS WAY OFF... PERCENT DEBT X TAX FACTOR X INTEREST COST.
hope that helps.... that 264469/607629 is the reason your answer is way off