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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) (0.5) What is Williamsons cost of equity capital?

b) (1) What is Williamsons unlevered cost of equity capital?

c) (0.5) What would Williamsons WACC be if the firms debt-equity ratio were 0.75? What is it were 1.5?

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