Question: Calculating WACC second Base Corp has no debt but can borrow at 7.5 percent. The firms WACC is currently 10 percent, and the tax rate

Calculating WACC second Base Corp has no debt but can borrow at 7.5 percent. The firm’s WACC is currently 10 percent, and the tax rate is 35 percent.

a. What is Second Base’s cost of equity?

b. If the firm converts to 25 percent debt, what will its cost of equity be?

c. If the firm converts to 50 percent debt, what will its cost of equity be?

d. What is Second Base’s WACC in part (b) In part (c)?

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