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ECN Incorporated has a capital structure that consists of 30% debt and 70% equity. The...

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Accounting

ECN Incorporated has a capital structure that consists of 30% debt and 70% equity. The companys cost of debt is 7%. The company has a beta of 1.9. The risk free rate equals 4.5% and the expected return on the market portfolio is 15%. What is ECN Incorporateds weighted average cost of capital, if their marginal tax rate equals 34%?

Why do we use (1-.34) for the weight of debt when calculating WACC?

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