(Weighted average cost of capital) In the spring of last year, Tempe Steel learn

Question

(Weighted average cost of capital) In the spring of last year, Tempe Steel learned that the firm would need to re-evaluate the company's weighted average cost of capital following a significant issue of debt. The firm now has financed 33 percent of its assets using debt and 57 percent using equity. Calculate the firm's weighted average cost of capital where the firm's borrowing rate on debt is 7.9 percent, it faces a 34 percent tax rate, and the common stockholders require a 19.7 percent rate of return.

Explanation / Answer

33%=57%=90%
So i think there is typo in the question, either debt should be 43% or equity should be 67%
Case 1:Assuming equity to be 67%
WACC=33%*7.9%*(1-34%)+67%*19.7%=14.9196%
Case 2:Assuming debt to be 43%
WACC=43%*7.9%*(1-34%)+57%*19.7%=13.471%

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