Horford Co. has no debt. Its cost of capital is 9.5 percent. Suppose the company converts to a debt-equity ratio of 1. The interest rate on the debt is 6.6 percent. Ignore taxes for this problem. a.    What is the company’s new cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)b.    What is its new WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Horford Co. has no debt. Its cost of capital is 9.5 percent. Suppose the company converts to a debt-equity ratio of 1. The interest rate on the debt is 6.6 percent. Ignore taxes for this problem. a.    What is the company’s new cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)b.    What is its new WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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