First National Bank has a debt-to-equity ratio of 3. Its weighted average cost of capital is 12.50% and its cost of debt is 8%. First National Bank is subject to a 25% corporate tax rate. a. What is First National Bank cost of equity? b. What is First National Bank un-levered cost of capital? c. What would be its weighted average cost of capital is debt equity ratio is 0.5? 4?

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First National Bank has a debt-to-equity ratio of 3. Its weighted average cost of capital
is 12.50% and its cost of debt is 8%. First National Bank is subject to a 25% corporate
tax rate.
a. What is First National Bank cost of equity?
b. What is First National Bank un-levered cost of capital?
c. What would be its weighted average cost of capital is debt equity ratio is 0.5? 4?

 

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