Suppose Goodyear Tire and Rubber Company has an equity cost of capital of 8.2%, a debt cost of capital of 6.7%, a marginal corporate tax rate of 45%, and a debt-equity ratio of 2.7. Assume that Goodyear maintains a constant debt-equity ratio.

a. What is Goodyear's WACC?

b. What is Goodyear's unlevered cost of capital?

c. Explain, intuitively, why Goodyear's unlevered cost of capital is less than its equity cost of capital and higher than its WACC

Suppose Goodyear Tire and Rubber Company has an equity cost of capital of 8.2%, a debt cost of capital of 6.7%, a marginal corporate tax rate of 45%, and a debt-equity ratio of 2.7. Assume that Goodyear maintains a constant debt-equity ratio. a. What is Goodyear's WACC? b. What is Goodyear's unlevered cost of capital? c. Explain, intuitively, why Goodyear's unlevered cost of capital is less than its equity cost of capital and higher than its WACC. a. What is Goodyear's WACC? The WACC is %. (Round to two decimal places.) b. What is Goodyear's unlevered cost of capital? Goodyear's unlevered cost of capital is %. (Round to two decimal places.)