Question
Williamson, Inc., has a debt-to-equity ratio of 2.43. The firms weighted average cost of capital is 11 percent, and its pretax cost of debt is
Williamson, Inc., has a debt-to-equity ratio of 2.43. The firms weighted average cost of capital is 11 percent, and its pretax cost of debt is 5 percent. Williamson is subject to a corporate tax rate of 30 percent. |
a. | What is Williamsons cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) |
Cost of equity capital | % |
b. | What is Williamsons 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).) |
Unlevered cost of equity | % |
c. | What would Williamsons weighted average cost of capital be if the firms debt-to-equity ratio were .65 and 1.80? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).) |
Weighted average cost of capital | |
Debtequity ratio .65 | % |
Debtequity ratio 1.80 | % |
PLEASE ANSWER ALL Question A, B and C! |
Williamson, Inc., has a debt-to-equity ratio of 2.43. The firms weighted average cost of capital is 11 percent, and its pretax cost of debt is 5 percent. Williamson is subject to a corporate tax rate of 30 percent. a. What is Williamsons cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Cost of equity capital 29.22 % b. What is Williamsons 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).) Unlevered cost of equity 7.66 % c. What would Williamsons weighted average cost of capital be if the firms debt-to-equity ratio were .65 and 1.80? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).) Weighted average cost of capital Debtequity ratio .65 % Debtequity ratio 1.80 %
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