# Question: Williamson Inc has a debt to equity ratio of 2 2 The firm s

Williamson, Inc., has a debt-to-equity ratio of 2.2. The firm’s weighted average cost of capital is 10 percent, and its pretax cost of debt is 6 percent. Williamson is subject to a corporate tax rate of 35 percent.

a. What is Williamson’s cost of equity capital?

b. What is Williamson’s unlevered cost of equity capital?

c. What would Williamson’s weighted average cost of capital be if the firm’s debt-to-equity ratio were .75? What if it were 1.5?

a. What is Williamson’s cost of equity capital?

b. What is Williamson’s unlevered cost of equity capital?

c. What would Williamson’s weighted average cost of capital be if the firm’s debt-to-equity ratio were .75? What if it were 1.5?

## Answer to relevant Questions

In a world of corporate taxes only, show that the RWACC can be written as RWACC = R0 × [1 – tC ( B/V)]. In Problem 4, use MM Proposition I to find the price per share of equity under each of the two proposed plans. What is the value of the firm? In problem Yasmin Corporation is comparing two different capital structures, an ...Maslyn Corp. has an EBIT of $740,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 14 percent, and the corporate tax rate is 35 percent. The company also has a perpetual ...Midnight Hour Inc., has declared a $5.10 per-share dividend. Suppose capital gains are not taxed, but dividends are taxed at 15 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. ...In the previous problem, suppose Levy has announced it is going to repurchase $10,400 worth of stock. What effect will this transaction have on the equity of the firm? How many shares will be outstanding? What will the price ...Post your question