Question: Explain in detail? what is wd, Rd, and we? ANSWER The corporate cost of capital is merely the weighted average (blend) of the component costs:

Explain in detail? what is wd, Rd, and we?

ANSWER The corporate cost of capital is merely the weighted average (blend)

ANSWER The corporate cost of capital is merely the weighted average (blend) of the component costs: Corporate cost of capital = [wd x R(Rd) x (1 - T)] + [we x R(Re)] [0.35 x 7.0% x (1 - 0.00)] + [0.65 x 13.5%] = 2.45% + 8.775% = 11.2% = Spreadsheet solution: wd = R(Rd) = T = We = R(Re) = 35% 7% 0% 65% 13.5%

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