# Marginal Cost of Capital Structure

This is regards to Example 13, page 66-67 on CFAI Vol 4. I know how to calculate WACC: (.1)(.065)(1-.36) + (.9)(.081) = 7.71 However, how do you calculate the Rd (%) and the Re (%). I don’t know if these numbers are just a given or if there’s a way to calculate them? I have re-read the section and the Schweser notes and I CANNOT figure out how to calculate Rd (%) and Re (%)… D/D+E Beta Rd (%) Re (%) WACC (%) 0.1 0.96 6.5 8.1 7.7 0.2 1.04 6.5 8.4 7.6 0.3 1.15 6.5 8.8 7.4 0.4 1.28 7.5 9.4 7.6 0.5 1.48 8.5 10.2 7.8 0.6 1.76 10.5 11.3 8.6 0.7 2.24 12.5 13.2 9.6 0.8 3.2 14.5 17.1 10.8 0.9 6.08 16.5 28.6 12.4

Okay, I think I’m going to assume that the schedule (hypothetical number) HAS to be given: New debt \$0 - \$99 = 4%, \$100 - \$299 = 4.25%, etc. and New equit \$0 - \$199 = 6%, \$200 - \$499 = 7%, etc. From what I can gather it appears those numbers HAVE to be given, and then you can calculate WACC based on the (D/D+E)…

Nevermind, I figured it out. I was using the wrong numbers for the: CAPM and Bond Yield plus Premium equations