WACC = (Wdebt)(rd)(1-tc) + (Wequity)(re)Where,Wdebt = proportion of debt in a market- value capital structurerd = pretax cost of debt capitaltc = marginal effective corporate tax rate
Wequity = proportion of equity in a market-value capital structurere = cost of equity capitalFrom Exhibit 10, Debt/equity ratio=0.525tc = 0.35From page 237, Rf = 0.85%From Exhibit 2, Wdebt =44646/129686=0.344Wequity = 85040/129686=0.656From Exhibit 11, rd is calculated as below which is 5.335%