Blitz Industries has a debt-equity ratio of 1.25. Its WACC is 8.3 percent, and its cost...

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Finance

Blitz Industries has a debt-equity ratio of 1.25. Its WACC is8.3 percent, and its cost of debt is 5.1 percent. The corporate taxrate is 21 percent.

a.
What is the company’s cost of equity capital? (Do notround intermediate calculations and enter your answer as a percentrounded 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 youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)
c-1. What would the cost of equity be if the debt-equity ratio were2? (Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)
c-2. What would the cost of equity be if the debt-equity ratio were1? (Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)
c-3. What would the cost of equity be if the debt-equity ratio werezero? (Do not round intermediate calculations and enteryour answer as a percent rounded to 2 decimal places, e.g.,32.16.)

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4.4 Ratings (879 Votes)

a WACC Weight of EquityCost of EquityWeight of DebtCost of Debt1Tax Rate 831225Cost of Equity Capital12522551121 8312522551121225 Cost of Equity Capital Cost of Equity Capital1364 b See Answer

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Blitz Industries has a debt-equity ratio of 1.25. Its WACC is8.3 percent, and its cost of debt is 5.1 percent. The corporate taxrate is 21 percent. a.What is the company’s cost of equity capital? (Do notround intermediate calculations and enter your answer as a percentrounded 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 youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)c-1.What would the cost of equity be if the debt-equity ratio were2? (Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)c-2.What would the cost of equity be if the debt-equity ratio were1? (Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)c-3.What would the cost of equity be if the debt-equity ratio werezero? (Do not round intermediate calculations and enteryour answer as a percent rounded to 2 decimal places, e.g.,32.16.)

a.	What is the company’s cost of equity capital? (Do notround intermediate calculations and enter your answer as a percentrounded 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 youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)
c-1.	What would the cost of equity be if the debt-equity ratio were2? (Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)
c-2.	What would the cost of equity be if the debt-equity ratio were1? (Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)
c-3.	What would the cost of equity be if the debt-equity ratio werezero? (Do not round intermediate calculations and enteryour answer as a percent rounded to 2 decimal places, e.g.,32.16.)