Question

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. |
What is the company’s cost of debt? |

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

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. The company has a target debt–equity ratio of .2. The
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...

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
Treasury bills currently yield 3.6 percent. The company has one
bond issue outstanding that matures in 20 years and has a coupon
rate of 8.2 percent. The bond currently sells for $1,140. The
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a beta of 1.10. The company has a target debt-equity ratio of .75.
The expected return on the market portfolio is 11 percent and
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The expected return on the market portfolio is 12 percent and
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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...

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
a beta of 0.9. The company has a target debt–equity ratio of .4.
The expected return on the market portfolio is 12 percent, and
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Kose, Inc., has a target debt-equity ratio of 1.47. Its WACC is
8.7 percent, and the tax rate is 21 percent. a. If the company’s
cost of equity is 16 percent, what is its pretax 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. If instead
you know that the aftertax cost of debt is 6.1 percent, what is the
cost of equity? (Do not round...

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