1. If Wild Widgets, Inc., were an all-equity company, it would have a beta of 1.6. The company has a target debt–equity ratio of 0.2. The expected return on the market portfolio is 13 percent, and Treasury bills currently yield 4.9 percent. The company has one bond issue outstanding that matures in 24 years and has an 6.9 percent coupon rate. The bond currently sells for $985. The corporate tax rate is 32 percent.
Requirement 1:
What is the company’s cost of debt? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))
Cost of debt %
Requirement 2:
What is the company’s cost of equity? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))
Cost of equity %
Requirement 3:
What is the company’s weighted average cost of capital? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))
Weighted average cost of capital %
This question was answered on: May 23, 2022
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