Weston Industries has a debt–equity ratio of 1.1. Its WACC is 9.6 percent, and its cost of debt is 7.2 percent. The corporate tax rate is 35 percent.
a. What is Weston’s cost of equity capital?
b. What is Weston’s unlevered cost of equity capital?
c. What would the cost of equity be if the debt–equity ratio were 2?
d. What would the cost of equity be if the debt–equity ratio were 1.0?
e. What would the cost of equity be if the debt–equity ratio were zero?