The Guys and Cinderella Store has a cost of equity of 15.8 percent, a pretax cost of debt of 7.7 percent, and a tax rate of 35 percent. What is the firm's weighted average cost of capital if the debt-equity ratio is 0.40? Start by determining the after-tax cost of debt Then since Debt / Equity = 0.40 Debt = 0.40 * Equity Use: Equity + Debt = 1 (This means their weights equal to one) Then substituting: Equity + 0.40 * Equity = 1 1.40 Equity = 1 Equity = 1/1.40 (Is the weight of equity) Then determine the weight of Debt and then combine the weights with the cost of equity and the afte-tax cost of debt