Question
Williamson, Inc. has a debt-equity ration of 2.5. The firms weighted average cost of capital is 10% and its pre-tax cost of debt is 6%.
Williamson, Inc. has a debt-equity ration of 2.5. The firms weighted average cost of capital is 10% and its pre-tax cost of debt is 6%. Williamson faces a corporate tax rate of 35%.
a. What is Williamsons cost of equity capital?
b. What is Williamsons unlevered cost of equity capital?
c. What would Williamsons WACC be if the firms debt-equity ratio were 0.75? What if it were 1.5?
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International Financial Management
Authors: Jeff Madura
3rd Edition
0314862722, 978-0314862723
