Q.

XYZ Company right now assumes no debt but can borrow the required amount, if any, at a cost of 9.5%. The weighted average cost of capital of the company, currently, is 13% and it comes under the tax bracket of 30%. What is the companys cost of equity? What will be the cost of equity if firm converts to 30% debt? What will be the cost of equity if firm converts to 55% debt?