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Williamson, Inc

Finance

Williamson, Inc., has a debt−equity ratio of 2.45. The company's weighted average cost of capital is 10 percent, and its pretax cost of debt is 6 percent. The corporate tax rate is 35 percent.

 

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

 

Cost of equity capital         

 ________________%

 

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

 

Unlevered cost of equity    __________________%

 

c. What would the weighted average cost of capital be if the company's debt−equity ratio were .80 and 1.70? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

 

Weighted average

cost of capital

Debt-equity ratio .80 ______________%

Debt-equity ratio 1.70 _______________%

 

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