PPT Slide

$ 0 $2,000 $2,000 -- 15.0% 15.0%

250 1,839 2,089 10% 15.5 14.4

500 1,618 2,118 11.0 16.5 14.2

750 1,342 2,092 13.0 18.0 14.3

Find the WACC at each debt level.

D S V kd ks WACC

e.g. D = $250:WACC = ($250/$2,089)(10%)(0.6)

+ ($1,839/$2,089)(15.5%)

= 14.4%.

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