Question
Weston Industries has a debt-equity ratio of 1.3. Its WACC is 7.5 percent, and its cost of debt is 5.2 percent. The corporate tax rate
| Weston Industries has a debt-equity ratio of 1.3. Its WACC is 7.5 percent, and its cost of debt is 5.2 percent. The corporate tax rate is 23 percent. |
| a. | What is the companys cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b. | What is the companys unlevered cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| c-1. | What would the cost of equity be if the debt-equity ratio were 2? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| c-2. | What would the cost of equity be if the debt-equity ratio were 1.0? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| c-3. | What would the cost of equity be if the debt-equity ratio were zero? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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Understanding Healthcare Financial Management
Authors: Louis C. Gapenski, George H. Pink
6th Edition
1567933629, 9781567933628
