In: Finance
Harris, Inc., has equity with a market value of $23.8 million and debt with a market value of $11.9 million. Treasury bills that mature in one year yield 4 percent per year and the expected return on the market portfolio is 10 percent. The beta of the company’s equity is 1.23. The company pays no taxes. |
a. | What is the company's debt-equity ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b. | What is the company’s weighted average cost of capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
c. | What is the cost of capital for an otherwise identical all-equity company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |