Harris, Inc., has equity with a market value of $18.5 million and debt with a...
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| Harris, Inc., has equity with a market value of $18.5 million and debt with a market value of $7.3 million. Treasury bills that mature in one year yield 4 percent per year and the expected return on the market portfolio is 11 percent. The beta of the companys equity is 1.15. The firm pays no taxes. |
| a. | What is the company's debt-equity ratio? (Round your answer to 2 decimal places, e.g., 32.16.) |
| b. | What is the firms weighted average cost of capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| c. | What is the cost of capital for an otherwise identical all-equity firm? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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