Hey im unsure in how how to plug the numbers into the formula Im using WACC = (w

Question

Hey im unsure in how how to plug the numbers into the formula

Im using WACC = (weight of equity x cost of equity )/ (weight of debt x Cost of debt)

80/200 --> .40 for my weight of equity
120/200 ---> .60 for weight of debt

im unsure how to break down the other numbers. please explain and show how thank you will give points quick.

MassTool Corporation is worth $200 million with $80 million of equity and the remainder as debt. The common stock has a dividend yield of 2% and a capital gain yield of 10%. The cost of the firm's debt is 3%. From these data the weighted average cost of capital is  percent.

Explanation / Answer

Cost of equity = Total gain on dividend and capital gain on price = 2%+10% = 12%

Cost of Debt = 3%

Hence WACC = 12% x (80/200) + 3%(120/200) = 12(0.4) + 3(0.6) = 4.8% + 1.8% = 6.6%

HEnce, WACC = 6.6%

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