Braxton Corp. currently has one million shares outstanding but no debt. If needed, however, the company can borrow at 6.8 percent interest. The company's WACC is currently 8.6 percent and the tax rate is 35 percent. a. What is the company's cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity |% b. If the firm converts to 30 percent debt, what will its cost of equity be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity c. If the firm converts to 40 percent debt, what will its cost of equity be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity
Braxton Corp. currently has one million shares outstanding but no debt. If needed, however, the company can borrow at 6.8 percent interest. The company's WACC is currently 8.6 percent and the tax rate is 35 percent. a. What is the company's cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity |% b. If the firm converts to 30 percent debt, what will its cost of equity be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity c. If the firm converts to 40 percent debt, what will its cost of equity be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 4P
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Transcribed Image Text:Braxton Corp. currently has one million shares outstanding but no debt. If needed,
however, the company can borrow at 6.8 percent interest. The company's WACC is
currently 8.6 percent and the tax rate is 35 percent.
a. What is the company's cost of equity? (Do not round intermediate calculations.
Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Cost of equity
%
b. If the firm converts to 30 percent debt, what will its cost of equity be? (Do not round
intermediate calculations. Enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.)
Cost of equity
c. If the firm converts to 40 percent debt, what will its cost of equity be? (Do not round
intermediate calculations. Enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.)
Cost of equity
%
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