Maroon Industries has a debt-equity ratio of 1.6. Its WACC is 10 percent, and its cost...

Transcribed Image Text:

Maroon Industries has a debt-equity ratio of 1.6. Its WACC is 10 percent, and its cost of debt is 7 percent. There is no corporate tax. a. What is the company's cost of equity capital? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b-1. What would the cost of equity be if the debt-equity ratio were 2? Note: Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32. b-2. What would the cost of equity be if the debt-equity ratio were .4? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b-3. What would the cost of equity be if the debt-equity ratio were zero? Note: Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32. Answer is complete but not entirely correct. a. Cost of equity 16.00% b-1. Cost of equity 10% b-2. Cost of equity 11.20 % b-3. Cost of equity 10 % Maroon Industries has a debt-equity ratio of 1.6. Its WACC is 10 percent, and its cost of debt is 7 percent. There is no corporate tax. a. What is the company's cost of equity capital? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b-1. What would the cost of equity be if the debt-equity ratio were 2? Note: Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32. b-2. What would the cost of equity be if the debt-equity ratio were .4? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b-3. What would the cost of equity be if the debt-equity ratio were zero? Note: Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32. Answer is complete but not entirely correct. a. Cost of equity 16.00% b-1. Cost of equity 10% b-2. Cost of equity 11.20 % b-3. Cost of equity 10 %