Question

Weston Industries has a debt-equity ratio of 1.8. Its WACC is 14 percent, and its cost of debt is 12 percent. The corporate tax rate is 36 percent. (Round your answers to 2 decimal places. (e.g., 32.16))

  

Required:

a.	Weston’s cost of equity capital is __x__ percent.

  

b.	Weston’s unlevered cost of equity capital is __y__ percent.

  

c.	The cost of equity would be __z__ percent if the debt-equity ratio were 2, __xx__ percent if the debt-equity ratio were 1, and __yy__ percent if the debt-equity ratio were 0.

Answer 1