If Wild Widgets Inc Were An All Equity Company It Would Have A Beta Of 1 The Com

If Wild Widgets, Inc., were an all-equity company, it would have a beta of 1.85. The company has a target debt-equity ratio of .3. The expected return on the market portfolio is 10 percent, and Treasury bills currently yield 6 percent. The company has one bond issue outstanding that matures in 20 years and has a coupon rate of 11 percent. The bond currently sells for $1,280. 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  8.14%

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  % 

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