[discussion_vu] Fin 622 gdb idea solution

WACC if the Debt-equity Ratio of Company is .5
WACC=.11(1/1.5) + .09(.5/1.5)(1-.35)
WACC=.11(.666666666) + .09(.333333333)(.65)
WACC=.073333333 + .03(.65)
WACC=.073333333 + .0195
WACC=.092833333
WACC=9.28%
WACC if the Debt-equity Ratio of Company is 1.0
WACC=.11(1/2) + .09(1/2)(1-.35)
WACC=.11(.5) + .09(.5) (.65)
WACC=.055 + ..045(.65)
WACC=.055+.02925
WACC=.08425
WACC=8.42%
WACC if the Debt-Equity Ratio of Company is 2.0
WACC=.11(1/3) + .09(2/3)(1-.35)
WACC=.11(.333333333) + .09(.666666666)(.65)
WACC=.036666666 + .06(.65)
WACC=.036666666 + .039
WACC=.075666666
WACC=7.56%
Trend of WACC With increasing D/E Ratio
Increase in Debt or Debt-equity Ratio decreases the WACC

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