Question
Whispering Pines Incorporated is all-equity-financed. The expected rate of return on the companys shares is 11.25%. A. What is the opportunity cost of capital for
Whispering Pines Incorporated is all-equity-financed. The expected rate of return on the companys shares is 11.25%.
A. What is the opportunity cost of capital for an average-risk Whispering Pines investment? Note: Enter your answer as a percent rounded to 2 decimal places.
B. Suppose the company issues debt, repurchases shares, and moves to a 27% debt-to-value ratio (D/V= 0.27) . What will be the companys weighted-average cost of capital at the new capital structure? The borrowing rate is 6.75% and the tax rate is 21%.Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
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