Dickson, Inc., has a debt-equity ratio of 2.55. The firm’s
weighted average cost of capital is...
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Dickson, Inc., has a debt-equity ratio of 2.55. The firm’sweighted average cost of capital is 12 percent and its pretax costof debt is 10 percent. The tax rate is 23 percent.
a.
What is the company’s cost of equity capital? (Do notround intermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)
b.
What is the company’s unlevered cost of equity capital?(Do not round intermediate calculations and enter youranswer as a percent rounded to 2 decimal places, e.g.,32.16.)
c.
What would the company’s weighted average cost of capital be ifthe company's debt-equity ratio were .55 and 1.55? (Do notround intermediate calculations and enter your answers as a percentrounded to 2 decimal places, e.g., 32.16.)
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Answer a DebtEquity Ratio 255 Weight of Debt 255 355 Weight of Debt 07183 Weight of Equity 100 355 Weight of Equity 02817 WACC Weight of Debt Pretax Cost of Debt 1 tax Weight of Equity Levered Cost of Equity 01200 07183 01000 1 023 02817 Levered Cost of Equity 01200 00553 02817 Levered Cost of Equity 00647 02817 Levered Cost of Equity Levered Cost
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