Portneuf Industries has a debt-equity ratio of 1.5. Its WACC is 8.4%, and its cost of debt is 5.9%. The corporate tax rate is 35%. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) a. What is the company's cost of equity capital? Cost of equity capital 2.65 % b. What is the company's unlevered cost of equity capital? Unlevered cost of equity capital c-1. What would the cost of equity be if the debt-equity ratio were 2? Cost of equity Cost of equity 0.73 % c-2. What would the cost of equity be if the debt-equity ratio were 1.0? Cost of equity 2.65% % c-3. What would the cost of equity be if the debt-equity ratio were zero? 11.5 1%

Portneuf Industries has a debt-equity ratio of 1.5. Its WACC is 8.4%, and its cost of debt is 5.9%. The corporate tax rate is 35%. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) a. What is the company's cost of equity capital? Cost of equity capital 2.65 % b. What is the company's unlevered cost of equity capital? Unlevered cost of equity capital c-1. What would the cost of equity be if the debt-equity ratio were 2? Cost of equity Cost of equity 0.73 % c-2. What would the cost of equity be if the debt-equity ratio were 1.0? Cost of equity 2.65% % c-3. What would the cost of equity be if the debt-equity ratio were zero? 11.5 1%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 2P

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Question

Portneuf Industries has a debt-equity ratio of 1.5. Its WACC is 8.4%, and its cost of debt is 5.9%. The corporate tax rate is 35%. (Do not
round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.)
a. What is the company's cost of equity capital?
Cost of equity capital
b. What is the company's unlevered cost of equity capital?
Unlevered cost of equity capital
2.65 %
c-1. What would the cost of equity be if the debt-equity ratio were 2?
Cost of equity
2.65 %
Cost of equity
0.73 %
c-2. What would the cost of equity be if the debt-equity ratio were 1.0?
Cost of equity
c-3. What would the cost of equity be if the debt-equity ratio were zero?
11.5%
%

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