Shadow Corp. has no debt but can borrow at 7.8 percent. The firm's WACC is currently...

 

Transcribed Image Text:

Shadow Corp. has no debt but can borrow at 7.8 percent. The firm's WACC is currently 9.6 percent, and the tax rate is 22 percent. a. What is the firm's cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the firm converts to 30 percent debt, what will its cost of equity be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. If the firm converts to 50 percent debt, what will its cost of equity be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d-1. If the firm converts to 30 percent debt, what will the company's WACC be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d-2. If the firm converts to 50 percent debt, what will the company's WACC be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Cost of equity % b. Cost of equity % C. Cost of equity % d-1. WACC % d-2. WACC % Shadow Corp. has no debt but can borrow at 7.8 percent. The firm's WACC is currently 9.6 percent, and the tax rate is 22 percent. a. What is the firm's cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the firm converts to 30 percent debt, what will its cost of equity be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. If the firm converts to 50 percent debt, what will its cost of equity be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d-1. If the firm converts to 30 percent debt, what will the company's WACC be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d-2. If the firm converts to 50 percent debt, what will the company's WACC be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Cost of equity % b. Cost of equity % C. Cost of equity % d-1. WACC % d-2. WACC %

Answer rating: 100% (QA)

To calculate the firms cost of equity cost of equity with different debt levels and the resulting we... View the full answer