Links Corp. has no debt but can borrow at 8 percent. The firms WACC is currently 13

Question:

Links Corp. has no debt but can borrow at 8 percent. The firm’s WACC is currently 13 percent, and there is no corporate tax.

a. What is Links’ cost of equity?

b. If the firm converts to 30 percent debt, what will its cost of equity be?

c. If the firm converts to 60 percent debt, what will its cost of equity be?

d. What is Links’ WACC in part (b)? In part (c)?

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...