debt yield to maturity

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Finance: The estimated cost of equity using the CAPM approach (cost of equity Percy Motors has a target capital structure of 40% debt and 60% of the shares, no preferred stock. The yield to maturity of outstanding bonds Company is 9% and its tax rate is 40%. Percy believes that the company CFO WACC is 13.70%. Which is the cost of Percy, actions? Round your answer to two decimal places.

The formula for the WACC is the cost% debt Label X (after tax cost of debt) + X% of the shares (capital cost) = WACC Come equity as of the EC and after tax cost of debt as a "CD" Now we have 1 equation and two unknowns to solve for YTM CD CD rate = / (1 – Taxes) or CD = 9% / (1-.4) .09/.6 = .054 or less, the CD of debt + x% x% Equity WACC = EC, 4 X 054 + .6 (EC, ) =, 1370 at 13.70% then 0216 + .6 (EC) = 1370 Now subtract, 0216 on both sides of the equation gives: .6 (EC) = 1368 Now divide both sides of the equation by 6 = EC, 2280 or 22.80%