Question

Williamson, Inc., has a debt−equity ratio of 2.40. The company's weighted average cost of capital is 11 percent, and its pretax cost of debt is 5 percent. The corporate tax rate is 30 percent.

a. What is the company's cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Cost of equity capital           

b. What is the company's unlevered cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Unlevered cost of equity       

c. What would the weighted average cost of capital be if the company's debt−equity ratio were .80 and 1.95? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

	Weighted average cost of capital
Debt–equity ratio .80
Debt–equity ratio 1.95

  

Answer 1