What is the lower bound for the firms weighted average cost, Financial Management

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What is the lower bound for the firms weighted average cost

Bounds on the Weighted Average Cost of Capital. The firm is financed by 30% of debt and 70% of equity. The corporate tax rate is 35%. The firm pays 2% interest rate on its debt to investors. The risk-free rate in the economy is also 2% and the firm equity has beta of 2.5.

a) What is the lower bound for the firm’s weighted average cost of capital?

b) What is the upper bound for the firm’s weighted average cost of capital?

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Financial Management: What is the lower bound for the firms weighted average cost

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