Gollum Co. has no debt. Its cost of capital is 9.5 percent. Suppose Gollum coverts to a

Question:

Gollum Co. has no debt. Its cost of capital is 9.5 percent. Suppose Gollum coverts to a debt-equity ratio of 1.0. The interest rate on the debt is 7.2 percent. Ignoring taxes, what Gollum’s new cost of equity? What is its new WACC?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...