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What is the company cost of equity

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Drakes Doughnuts Limited currently has no debt. If they choose to borrow they can do so at a rate of 6.4%. The firm's WACC is currently 9.5% and the tax rate is 35%. There are no costs of financial distress.

a) What is the company's cost of equity?

b) If the firm converts to 25% debt, what will its' cost of equity be?

c) If the firm converts to 50% debt, what will its' cost of equity be?

d) What is the company's WACC in part (c)?

Reference no: EM132908274

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