Question
Williamson, Inc., has a debtequity ratio of 2.4. The company's weighted average cost of capital is 11 percent, and its pretax cost of debt is
Williamson, Inc., has a debtequity ratio of 2.4. The company's weighted average cost of capital is 11 percent, and its pretax cost of debt is 5 percent. The corporate tax rate is 30 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.) Cost of equity capital % 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.) Unlevered cost of equity % c. What would the companys weighted average cost of capital be if the company's debtequity ratio were .80 and 1.95? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Weighted average cost of capital Debtequity ratio = .80 % Debtequity ratio = 1.95 %
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