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Shadow Corp. has no debt but can borrow at 6.7 percent. The firms WACC is currently 9.3 percent and the tax rate is 23 percent.

Shadow Corp. has no debt but can borrow at 6.7 percent. The firms WACC is currently 9.3 percent and the tax rate is 23 percent.

a. What is the companys cost of equity?

b. If the firm converts to 25 percent debt, what will its cost of equity be?

c. If the firm converts to 55 percent debt, what will its cost of equity be?

d-1. If the firm converts to 25 percent debt, what is the companys WACC?

d-2. If the firm converts to 55 percent debt, what is the companys WACC?

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