Question
Please answer part D of this problem which is not listed below. I included the photo so you could see the layout steps, but all
Please answer part D of this problem which is not listed below. I included the photo so you could see the layout steps, but all I need solved is D.
Part D: D) Now suppose that Stodgys management suddenly decides that it could use a little more excitement. Specifically, it decides to increase Stodgys debt-to-value ratio (in market value terms) to 80%. Using your answers to (b) and (c), find Stodgys new levered cost of equity and its new weighted average cost of capital for the new capital structure. Can you cite any reasons why you should be cautious in using the new cost of capital figures that you have calculated?
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