Dickson, Incorporated, has a debt-equity ratio of 2.4. The firm's weighted average cost of capital is...
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Dickson, Incorporated, has a debt-equity ratio of 2.4. The firm's weighted average cost of capital is 9 percent and its pretax cost of debt is 7 percent. The tax rate is 25 percent. a. What is the company's cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the company's unlevered cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What would the company's weighted average cost of capital be if the company's debt- equity ratio were 70 and 1.40? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. a. Cost of equity 18.00 % b. Unlevered cost of equity 10.24 % c. WACC if debt-equity ratio = 0.70 12.75 % c. WACC if debt-equity ratio = 1.40 10.56 % Dickson, Incorporated, has a debt-equity ratio of 2.4. The firm's weighted average cost of capital is 9 percent and its pretax cost of debt is 7 percent. The tax rate is 25 percent. a. What is the company's cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the company's unlevered cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What would the company's weighted average cost of capital be if the company's debt- equity ratio were 70 and 1.40? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. a. Cost of equity 18.00 % b. Unlevered cost of equity 10.24 % c. WACC if debt-equity ratio = 0.70 12.75 % c. WACC if debt-equity ratio = 1.40 10.56 %
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