Question

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 answer as a percent rounded to 2 decimal places, e.g., 32.16.)
c.	What would the company’s weighted average cost of capital be if the company's debt-equity ratio were .70 and 1.20? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1