Question
Williamson, Inc., has a debtequity ratio of 2.55. 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 2.55. 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 company's cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is the company's unlevered cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
c. What would the weighted average cost of capital be if the company's debtequity ratio were .85 and 1.75? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
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