A firm currently has no debt and its equity beta is currently 1.0. The risk-free interest rate is 3% and the market risk premium is 6%. There are no corporate taxes (i.e., the corporate tax rate is 0%). The firm considers switching its debt equity ratio to .5 (i.e., they will set D/E = .5). The debt they issue will pay 3% interest. 

If they make this change, what will the firm's weighted average cost of capital be after the change?

Answer rating: 100% (QA)

SOLUTION To calculate the firms weighted average cost of capital WACC after the change in debtequity ... View the full answer