If a firm is financed equally by debt and equity, and the cost of debt...

The weighted average cost of capital (WACC) is given by the average cost of debt and equity, weighted by their proportions in the capital structure. The cost of debt should be considered after taxes, as interest is a tax deductible expense. Therefore the WACC in this case can be calculated as = [10% x (1-25%) x 0.5] + [14% x 0.5] = 10.75%