Answer:
5.70%
Explanation:
The computation of WACC is shown below
But before that first we have to compute after tax cost of debt and the cost of equity which is shown below:
After tax cost of debt is
= 4.65% × (1 - 0.21)
= 3.67%
And, the cost of equity is
= Risk free rate + beta × Market risk premium
= 2.5% + 0.85 × 5.5%
= 7.175%
Now the WACC is
= Weightage of debt × cost of debt + weightage of equity × cost of equity
= 42% × 3.67% + 58% × 7.175%
= 1.54% + 4.16%
= 5.70%
