Williamson, Inc

Subject:FinancePrice: Bought3

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Williamson, Inc. has a debt-equity ration of 2.5. The firm’s weighted average cost of capital is 10% and its pre-tax cost of debt is 6%. Williamson faces a corporate tax rate of 35%.

1. What is Williamson’s cost of equity capital?
2. What is Williamson’s unlevered cost of equity capital?
3. What would Williamson’s WACC be if the firm’s debt-equity ratio were 0.75? What is it were 1.5?