Empress Corp. has no debt but can borrow at 8.2%. The firm's WACC is currently 11%, and

Question:

Empress Corp. has no debt but can borrow at 8.2%. The firm's WACC is currently 11%, and the tax rate is 35%.
a) What is the company's cost of equity?

b) If the firm converts to 25% debt, what will its cost of equity be?

c) If the firm converts to 50% debt, what will its cost of equity be?

d) What is the company's WACC is part (b)? In part (c)?

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...