Williamson Inc. has a debt-to-equity ratio of 2.60. The firm's WACC is 9 percent, and its pretax cost of debt is 7 percent. Williamson is subject to a corporate tax rate of 40 percent. (Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. What is Williamson's cost of equity capital? Cost of equity capital % b. What is Williamson's unlevered cost of equity capital? Unlevered cost of equity % c. What would Williamson's WACC be if the firm's debt-to-equity ratio were 0.80? 1.80? Debt-to-equity ratio 0.80 Debt-to-equity ratio 1.80 Weighted average cost of capital
Williamson Inc. has a debt-to-equity ratio of 2.60. The firm's WACC is 9 percent, and its pretax cost of debt is 7 percent. Williamson is subject to a corporate tax rate of 40 percent. (Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. What is Williamson's cost of equity capital? Cost of equity capital % b. What is Williamson's unlevered cost of equity capital? Unlevered cost of equity % c. What would Williamson's WACC be if the firm's debt-to-equity ratio were 0.80? 1.80? Debt-to-equity ratio 0.80 Debt-to-equity ratio 1.80 Weighted average cost of capital
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 7P
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Transcribed Image Text:Williamson Inc. has a debt-to-equity ratio of 2.60. The firm's WACC is 9 percent, and its pretax cost of debt is 7 percent. Williamson is
subject to a corporate tax rate of 40 percent. (Do not round intermediate calculations. Round the final answers to 2 decimal places.)
a. What is Williamson's cost of equity capital?
Cost of equity capital
%
b. What is Williamson's unlevered cost of equity capital?
Unlevered cost of equity
%
c. What would Williamson's WACC be if the firm's debt-to-equity ratio were 0.80? 1.80?
Debt-to-equity ratio 0.80
Debt-to-equity ratio 1.80
Weighted average
cost of capital
%
%
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