Twice Shy Industries has a debt−equity ratio of 1.7. Its WACC is 9.6 percent, and its cost of debt is 7 percent. The corporate tax rate is 35 percent.
a. What is the company’s cost of equity capital?
Cost of equity capital ______ 18.18 %
b. What is the company’s unlevered cost of equity capital?
Unlevered cost of equity capital _______________%
c-1. What would the cost of equity be if the debt−equity ratio were 2?
Cost of equity __________________%
c-2. What would the cost of equity be if the debt−equity ratio were 1.0?
Cost of equity _______________%
c-3. What would the cost of equity be if the debt−equity ratio were zero?
Cost of equity _________________%