1. Laurier Corp. has no debt but can borrow at 6.4 percent. The firms WACC is currently 9.5 percent, and the tax rate is 35 percent.
a) What is the company's cost of equity
b) If the firm converts to 25 percent debt, what will its cost of equity
c) If the firm converts to 50 percent debt, what will its cost of equity be?
d) What is the company's WACC in part (a) and (b) in part (c)?
2. Which of the following would not be described as a debenture?
A. An unsecured loan
B. A loan secured by collateral
C. A loan secured by the “full faith and credit” of the issuer.