Finance Problem but its basic math, i just cant see it right now

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SUMMARY

The discussion centers on calculating the Weighted Average Cost of Capital (WACC) using the formula WACC = wd kd (1 - T) + ws ks. The user successfully determined that the weight of debt (wd) is 30% by manipulating the equation and substituting values. The correct approach involves recognizing that the sum of wd and the weight of equity (1 - wd) must equal 100%. The user initially struggled with the calculation but ultimately clarified the correct method for solving the problem.

PREREQUISITES
  • Understanding of WACC and its components (wd, kd, T, ws, ks)
  • Basic algebraic manipulation skills
  • Familiarity with financial concepts such as common equity and cost of capital
  • Knowledge of percentage calculations and their application in finance
NEXT STEPS
  • Study the derivation of the WACC formula in financial analysis
  • Learn about the implications of different capital structures on WACC
  • Explore the impact of tax rates on WACC calculations
  • Investigate common equity valuation methods and their relationship to WACC
USEFUL FOR

Finance students, financial analysts, and anyone involved in corporate finance or investment analysis will benefit from this discussion, particularly those looking to deepen their understanding of capital cost calculations.

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Homework Statement



A. 53%
B. 40%
C. 30%
D. 70%
E. 36%

Solution: WACC = wd kd (1 - T) + wsks ; 13.00% = wd (9% (1 - 0.35)) + (1 - wd) ($2(1.075)/$25.00 + 7.5%) ; Solve for wd = 30%.



Homework Equations





The Attempt at a Solution



ok, i got this one right but i did it by plugging in the answer becus i cld not figure it out. The formula for the answer how they do it is above but simplified i get this: .13=wd(.0585)+(1-wd)(.161)

wd comes out to be 30 percent.

i must be missing something because i can not figure it out
 
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ok sweet i think i got it..

this is what i did.

13=5.85wd+16.1-16.1wd

-3.1=-10.25wd

wd=0.302439024

Since both must equal 100 in this problem. that is why they do 1-wd. What i originally did on the quiz was i just plugged in the answers wd and solved and then w/e was left must equal to 100. so using the 30 i got the common equity to be 70 percent when i plugged it in and BAM problem solved. I am just trying to figure out how the correct way was.
 

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