Question
Calculating WACC Solar Industries has a debt-equity ratio of 1.25. Its WACC is 7.8 percent, and its cost of debt is 4.7 percent. The corporate
Calculating WACC Solar Industries has a debt-equity ratio of 1.25. Its WACC is
7.8 percent, and its cost of debt is 4.7 percent. The corporate tax rate is 21 percent.
a. What is the company’s cost of equity capital?
b. What is the company’s unlevered cost of equity capital?
c. What would the cost of equity be if the debt-equity ratio were 2? What if it were 1?
What if it were zero?
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Fundamentals of Corporate Finance
Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan
8th Edition
978-0073530628, 978-0077861629
