Question
Williamson, Inc., has a debtequity ratio of 2.42. The firms weighted average cost of capital is 10 percent, and its pretax cost of debt is
Williamson, Inc., has a debtequity ratio of 2.42. The firms weighted average cost of capital is 10 percent, and its pretax cost of debt is 6 percent. Williamson is subject to a corporate tax rate of 35 percent. |
a. | What is Williamsons cost of equity capital? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
Cost of equity capital | 24.72 % |
b. | What is Williamsons unlevered cost of equity capital? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
Unlevered cost of equity | 13.28 % |
c. | What would Williamsons weighted average cost of capital be if the firms debtequity ratio were .70 and 1.85? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) |
Weighted average cost of capital | |
Debtequity ratio .70 | % |
Debtequity ratio 1.85 | % |
Part a and b are correct but I cannot figure out part c- thank you.
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