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Solving for Unlevered Cost of Equity given levered cost of equity. Here's what I have solved for (including all information needed to answer) D/E Ratio:
Solving for Unlevered Cost of Equity given levered cost of equity.
Here's what I have solved for (including all information needed to answer)
D/E Ratio: .7
Weighted Average Cost of Capital: .093
Cost of Debt: .064
Tax Rate = .24
Weight of Debt: .41
Weight of Equity = .59
.093=.59CostofEquity+.41.064.76
Cost of Equity (Levered): .1241
To find Unlevered Cost of Equity, Ru, the formula is
.1241=Ru+(Ru-.064)(.7)(.76) (solve for Ru)
I don't know how to solve this algebraically. Please help.
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