Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

If Wild Widgets Inc. were an all-equity company, it would have a beta of 1.80 . The company has a target debt-to-equity ratio of 0.2

image text in transcribed

If Wild Widgets Inc. were an all-equity company, it would have a beta of 1.80 . The company has a target debt-to-equity ratio of 0.2 . The expected return on the market portfolio is 8 percent, and Treasury bills currently yield 5.9 percent. The company has one bond issue outstanding that matures in 20 years and has a 10.8 percent coupon rate. The bond currently sells for $1,270. The corporate tax rate is 35 percent a. What is the company's cost of debt? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit \% sign in your response.) Cost of debt % b. What is the company's cost of equity? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit % sign in your response.) Cost of equity % c. What is the company's WACC? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit \% sign in your response.) WACC %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Finance

Authors: Keith Pilbeam

4th Edition

0230362893, 978-0230362895

More Books

Students also viewed these Finance questions