Question

If Wild Widgets, Inc., were an all-equity company, it would have a beta of .95. The company has a target debt-equity ratio of .50. The expected return on the market portfolio is 12 percent and Treasury bills currently yield 3.1 percent. The company has one bond issue outstanding that matures in 25 years, a par value of $1,000, and a coupon rate of 6 percent. The bond currently sells for $1,050. The corporate tax rate is 23 percent.

a. What is the company’s cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b. What is the company’s cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

c. What is the company’s weighted average cost of capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer #1

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expected return on the market portfolio is 10 percent, and Treasury
bills currently yield 4.3 percent. The company has one bond issue
outstanding that matures in 20 years and has a coupon rate of 7.6
percent. The bond currently sells for $1,110. The corporate tax
rate is 34 percent.
A. What is the company’s cost...

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If Wild Widgets, Inc., were an all-equity company, it would have
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The expected return on the market portfolio is 10 percent and
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bond issue outstanding that matures in 30 years, a par value of
$1,000, and a coupon rate of 6.1 percent. The bond currently sells
for $1,055. The corporate tax rate is 24 percent.
a....

If Wild Widgets, Inc., were an all-equity company, it would have
a beta of 1.05. The company has a target debt-equity ratio of .55.
The expected return on the market portfolio is 10 percent and
Treasury bills currently yield 3.2 percent. The company has one
bond issue outstanding that matures in 30 years, a par value of
$1,000, and a coupon rate of 6.1 percent. The bond currently sells
for $1,055. The corporate tax rate is 24 percent.
a....

If Wild Widgets, Inc., were an all-equity company, it would have
a beta of 1.15. The company has a target debt-equity ratio of .65.
The expected return on the market portfolio is 12 percent and
Treasury bills currently yield 3.4 percent. The company has one
bond issue outstanding that matures in 25 years, a par value of
$1,000, and a coupon rate of 6.3 percent. The bond currently sells
for $1,065. The corporate tax rate is 21 percent. a. What...

If Wild Widgets, Inc., were an all-equity company, it would have
a beta of 1.15. The company has a target debt-equity ratio of .65.
The expected return on the market portfolio is 12 percent and
Treasury bills currently yield 3.4 percent. The company has one
bond issue outstanding that matures in 25 years, a par value of
$1,000, and a coupon rate of 6.3 percent. The bond currently sells
for $1,065. The corporate tax rate is 21 percent.
a.
What...

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Question: If Wild Widgets, Inc., were an all-equity company, it
would have a beta of 1.3. The company has a... If Wild Widgets,
Inc., were an all-equity company, it would have a...

I have been able to determine a. but am stuck on b. and c. for
this question...
If Wild Widgets, Inc., were an all-equity company, it would have
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The expected return on the market portfolio is 12 percent, and
Treasury bills currently yield 4.1 percent. The company has one
bond issue outstanding that matures in 20 years and has a coupon
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Dickson, Inc., has a debt-equity ratio of 2.2. The firm’s
weighted average cost of capital is 9 percent and its pretax cost
of debt is 6 percent. The tax rate is 21 percent.
a.
What is the company’s cost of equity capital? (Do not
round intermediate calculations and 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 and enter your...

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