Question
Dickson, Inc., has a debt-equity ratio of 2.9. The firms weighted average cost of capital is 11 percent and its pretax cost of debt is
Dickson, Inc., has a debt-equity ratio of 2.9. The firms weighted average cost of capital is 11 percent and its pretax cost of debt is 7 percent. The tax rate is 25 percent.
a. What is the companys 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 companys 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 companys weighted average cost of capital be if the company's debt-equity ratio were .20 and 1.90?
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