Assignment:
Calculating WACC. Walkabout Tours Ltd has no debt but can borrow at 8%. The firm's WACC is currently 13%, and there is no corporate tax.
a. What is Walkabout's cost of equity?
b. If the firm converts to 30% debt, what will its cost of equity be?
c. If the firm converts to 60% debt, what will its cost of equity be?
d. What is Walkabout's WACC in part b? In part c?