Explain the weighted average cost of capital

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Reference no: EM131896941

You are reviewing the capital structure of your business. You find that your business is financed with 70% cash and 30% debt.

Your required rate of return for your business is 10%.

Your debt cost is 7%

You are in the 20% tax bracket.

Explain the weighted average cost of capital?

What if you used 80% debt and 20% cash? What would be your new WACC?

How would using more debt in this example affect your profitability as a business?

Reference no: EM131896941

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