Assume That XYZ Corporation Is a Leveraged Company with a Cost

Essay

Assume that XYZ Corporation is a leveraged company with a cost of capital of 10%.The before-tax cost of borrowing is 5% and the marginal tax rate is 30%.
a)If XYZ's debt-to-total-market-value ratio is 40%,what is its weighted average cost of capital,WACC?
b)Calculate the debt-to-total-market-value ratio that would result in XYZ having a weighted average cost of capital of 9.3%.