Question

Dickson, Inc., has a debt-equity ratio of 2.5. The firm’s weighted average cost of capital is 11 percent and its pretax cost of debt is 9 percent. The tax rate is 22 percent.

  

a.	What is the company’s cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b.	What is the company’s unlevered cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
c.	What would the company’s weighted average cost of capital be if the company's debt-equity ratio were .60 and 1.50? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a. Cost of equity % b. Unlevered cost of equity % c. WACC if debt-equity ratio = 0.60 % WACC if debt-equity ratio = 1.50 %

Answer 1