Question
Shadow Corp. has no debt but can borrow at 5.8 percent. The firms WACC is currently 9.1 percent and the tax rate is 22 percent.
Shadow Corp. has no debt but can borrow at 5.8 percent. The firms WACC is currently 9.1 percent and the tax rate is 22 percent.
a. What is the companys cost of equity?
b. If the company converts 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 companys WACC in part (b)? In part (c)?
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Quantitative Finance Its Development Mathematical Foundations And Current Scope
Authors: T. Wake Epps
1st Edition
0470431997, 9780470431993
