Problem 13-10 Calculating WACC [LO 1]

Crosby Industries has a debt-equity ratio of 1.1. Its WACC is 12 percent, and its cost of debt is 5 percent. There is no corporate tax.

Requirement 1:

What is Crosbys cost of equity capital? (Do not round intermediate calculations. Input your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Cost of equity

%

Requirement 2:

(a)	What would the cost of equity be if the debt-equity ratio were 2? (Do not round intermediate calculations. Input your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Cost of equity

%

(b)	What would the cost of equity be if the debt-equity ratio were 0.6? (Do not round intermediate calculations. Input your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Cost of equity

%

(c)	What would the cost of equity be if the debt-equity ratio were zero? (Do not round intermediate calculations. Input your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Cost of equity

%