Solution-Firm cost of equity-shadow corp

Firm cost of equity-shadow corp

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Reference no: EM132668094

Shadow Corp. has no debt but can borrow at 6.6 percent. The firm's WACC is currently 8.4 percent, and the tax rate is 35 percent.

a. What is the firm's cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b. If the firm converts to 25 percent debt, what will its cost of equity be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

c. If the firm converts to 40 percent debt, what will its cost of equity be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

d-1 If the firm converts to 25 percent debt, what will the company's WACC be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

d-2 If the firm converts to 40 percent debt, what will the company's WACC be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Reference no: EM132668094

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Firm cost of equity-shadow corp

Reference no: EM132668094

Reference no: EM132668094

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