Question

The Gupta Company's cost of equity is 16 percent. Its before-tax cost of debt is 13 percent, and its marginal tax rate is 40 percent. The stock sells at book value. Using the following balance sheet, calculate Gupta's after-tax weighted average cost of capital.

Answer 1

kd*(1-tax)*d/(d+e)+ke*e/(e+d)
here kd=13%
ke=16%
tax=40%
but where is D/e
i think balance sheet is missing

Answer 2

@deemafnas

Answer 3

Hi Minoz,
I was finally able to come up with the answer by:
rdT = .13 (1-.40) = .780 * $1,152 = $89.86
re = .16 * $1,728 = $276.48
$89.86 / $276.48 = .1272 or 12.72% is after-tax WACC

Thx for your response.