The following data is regarding the Link Company: A target debt/equity ratio of 0.5 Bonds are currently yielding 10% Link is a constant growth firm that just paid a dividend of $3.00 Stock sells for $31.50 per share, and has a growth rate of 5% Marginal tax rate is 40% What is Link’s after-tax cost of capital（）
A. 12.0%.
B. 12. 5%.
C. 11.0%.
参考答案：A
解析：
Use the revised form of the constant growth model to determine the cost of equity. Use algebra to determine the weights for the target capital structure realizing that debt is 50% of equity. Substitute 0.5E for D in the formula below.
ks =D1/P0 +growth =3 × 1.05/31.50 +0.05 =0.15 or 15%
V=debt+equity=0.5+1 =1.5
WACC = (E/V) (ks) + (D/V) (kdebt) (1-t)
WACC = (1/1.5) ×0.15 + (0.5/1.5) ×0.10 × (1 -0.4) =0.1 +0.02 =0.12 or 12%