Williamson, Inc., has a debt–equity ratio of 2.51. The firm’s weighted average cost of capital is 9 percent, and its pretax cost of debt is 7 percent. Williamson is subject to a corporate tax rate of 40 percent.
a. What is Williamson’s cost of equity capital? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Cost of equity capital %
b. What is Williamson’s unlevered cost of equity capital? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Unlevered cost of equity %
c. What would Williamson’s weighted average cost of capital be if the firm’s debt–equity ratio were .70 and 1.55? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
Weighted average cost of capital
Debt–equity ratio %
Debt–equity ratio %