What is the company cost of debt and equity

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Reference no: EM131531193

If Wild Widgets, Inc., were an all-equity company, it would have a beta of 1.35. The company has a target debt–equity ratio of .2. The expected return on the market portfolio is 10 percent, and Treasury bills currently yield 5 percent. The company has one bond issue outstanding that matures in 20 years and has a coupon rate of 9 percent. The bond currently sells for $1,180. The corporate tax rate is 34 percent.

a. What is the company’s cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Cost of debt %

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

Cost of equity %

c. What is the company’s 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.)

WACC %

Reference no: EM131531193

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