I need help spoting the error in the equation below: 100K in debt and 100 k in e

Question

I need help spoting the error in the equation below:

100K in debt and 100 k in equity or 50% of debt and 50% of equity. We are given that the cost of equity is 12%, and our cost of debt is 8% and our tax rate is 40%. Plugging the numbers into our formula we get .50 x .08 (1-.40) plus .50 x .12 which equals 8.4% as our weighted average cost of capital.

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Explanation / Answer

there is no error,its correct.

12*0.5 + 8*(1-0.40)*0.5

6 + 2.4

8.4%

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