Question

Malkin Corp. has no debt but can borrow at 8.25 percent. The firm’s WACC is currently 15 percent, and there is no corporate tax. a. What is the company’s cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32.) Cost of equity % b. If the firm converts to 30 percent debt, what will its cost of equity be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity % c. If the firm converts to 50 percent debt, what will its cost of equity be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity % d. What is the company’s WACC in parts (b) and (c)? (Do not round intermediate calculations and enter your answers as a percent rounded to the nearest whole number, e.g., 32.) WACC 30 percent % 50 percent %

Answer 1