1. Weston Industries has a debtequity ratio of 1.5. Its WACC is 11 percent, and its cost of debt is 7 percent. The corporate tax rate is 35 percent.

1. What is Westons cost of equity capital?
2. What is Westons unlevered cost of equity capital?
3. What would the cost of equity be if the debtequity ratio were 2? What if it were 1.0? What if it were zero?

2. Shadow Corp. has no debt but can borrow at 8 percent. The firms WACC is currently 11 percent, and the tax rate is 35 percent.

1. What is Shadows cost of equity?
2. If the firm converts to 25 percent debt, what will its cost of equity be?
3. If the firm converts to 50 percent debt, what will its cost of equity be?
4. What is Shadows WACC in part (b)? In part (c)?