Instructions to solve the problem:

You are required to use a financial calculator or spreadsheet (Excel) to solve the problem related to the cost of capital.

You are required to show the following 3 steps for the problem.

1. Describe and interpret the assumptions related to the problem.
2. Apply the appropriate mathematical model to solve the problem.
3. Calculate the correct solution to the problem. Submit all answers as percentages and round to two decimal places.

Problem:

Enzo, Inc. has a target capital structure of 40% debt and 60% common equity and is in the 40% marginal tax rate. If Enzos before-tax cost of debt is 12% and cost of common stock is 20%, what is the firm's WACC?

Thank you,