Nike, Inc., has a debt-equity ratio of 2.3. The firm's weighted average cost of capital is 10 percent and its pretax cost of debt is 6%. The tax rate is 24%. What would the company's weighted average cost of capital be if the firm's debt-equity ratio were .75 and 1.3?

Nike, Inc., has a debt-equity ratio of 2.3. The firm's weighted average cost of capital is 10 percent and its pretax cost of debt is 6%. The tax rate is 24%. What would the company's weighted average cost of capital be if the firm's debt-equity ratio were .75 and 1.3?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 7EB: Assume Plainfield Manufacturing has debt of $6,500,000 with a cost of capital of 9.5% and equity of...

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Question

Nike, Inc., has a debt-equity ratio of 2.3. The firm's weighted average cost of capital is 10 percent and its pretax cost of debt is 6%. The tax rate is 24%.

What would the company's weighted average cost of capital be if the firm's debt-equity ratio were .75 and 1.3?

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