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Solve weighted average cost of capital for existing capital

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Reference no: EM132688581

WACC calculation and interpretation

Question (i) The table below shows the existing capital structure (at market value) and its corresponding after-tax costs for Mitre Company. You are employed as an accountant of Mitre Company. Calculate the Weighted Average Cost of Capital (WACC) for the existing capital structure. (Round your percentage answer to two decimal places)

Non-current liabilities $1,500,000,After-tax cost 10%

ordinary shareholders equity $1,000,000,After-tax cost 12%

Question (ii) Explain how this rate can be used to evaluate any proposed investment projects.

Reference no: EM132688581

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