If Wild Widgets, Inc., were an all-equity company, it would have a beta of 1.15. The...

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If Wild Widgets, Inc., were an all-equity company, it would havea beta of 1.15. The company has a target debt-equity ratio of .50.The expected return on the market portfolio is 12 percent andTreasury bills currently yield 3.1 percent. The company has onebond issue outstanding that matures in 24 years, a par value of$2,000, and a coupon rate of 5.8 percent. The bond currently sellsfor $2,150. The corporate tax rate is 22 percent.

a.
What is the company’s cost of debt? (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)
b. What is the company’s cost of equity? (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)
c. What is the company’s weighted average cost of capital?(Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)

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4.2 Ratings (788 Votes)

Levered Beta Unlevered Beta x 1 1 Tax Rate x DebtEquity levered beta 1151102205 levered beta 16 DA DED DA 05105 03333 Weight of equity See Answer

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If Wild Widgets, Inc., were an all-equity company, it would havea beta of 1.15. The company has a target debt-equity ratio of .50.The expected return on the market portfolio is 12 percent andTreasury bills currently yield 3.1 percent. The company has onebond issue outstanding that matures in 24 years, a par value of$2,000, and a coupon rate of 5.8 percent. The bond currently sellsfor $2,150. The corporate tax rate is 22 percent. a.What is the company’s cost of debt? (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)b.What is the company’s cost of equity? (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)c.What is the company’s weighted average cost of capital?(Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)

a.	What is the company’s cost of debt? (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)
b.	What is the company’s cost of equity? (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)
c.	What is the company’s weighted average cost of capital?(Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)