Question

Braxton Corp. has no debt but can borrow at 7.8 percent. The firm’s WACC is currently 9.6 percent, and the tax rate is 35 percent.

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

b) if the firm converts to 30 percent debt, what will its cost of equity be?

c) If the firm converts to 50 percent debt, what will its cost of equity be??

d1) If the firm converts to 30 percent debt, what is the company’s WACC??

d2) If the firm converts to 50 percent debt, what is the company’s WACC??

  

Answer 1