ayaz_mahmud369

still confused. let pay with some numbers
total asset $200, financed with 50% of debt and 50% of equity
total debt $100, cost of debt 7%, tax rate 30%, after tax cost of debt 4.9%
equity $100, cost of equity 12%
EBIT=$40 in the income statement

NI=(EBIT-interest)*(1-tax rate)=(40-100*0.07)*0.7=23.1
RI=NI-rB=23.1-0.12*100=11.1

NOPAT=EBIT*(1-tax rate)=40*0.7=28
WACC=0.5*4.9+0.5*12=8.45%
EP=NOPAT-WACC*invested capital=28-200*0.0845=28-16.9=11.1

it is not 100% financed through equity but still get the same result.
Where did I get it wrong?