Question
Shadow Corp. has no debt but can borrow at 5.8 percent.The firm's WACC is currently 9.1 percent and the tax rate is 22 percent. a)
Shadow Corp. has no debt but can borrow at 5.8 percent.The firm's WACC is currently 9.1 percent and the tax rate is 22 percent.
a) what is the company's cost of equity?
b) if the company coverts to 25 percent debt, what will its cost of equity be?
c) if the company converts to 50 percent debt, what will its cost of equity be?
d) what is the company's WACC in part (b)? In part (c)?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
11th edition
324422870, 324422873, 978-0324302691
