If Wild Widgets, Inc., were an all-equity company, it would have
a beta of 1. The company has a target debt–equity ratio of .2. The
expected return on the market portfolio is 10 percent, and Treasury
bills currently yield 4.3 percent. The company has one bond issue
outstanding that matures in 20 years and has a coupon rate of 7.6
percent. The bond currently sells for $1,110. The corporate tax
rate is 34 percent.
What is the company’s cost of...