Whispering Pines Inc. is all-equity-financed. The expected rate of return on the company's shares is 9.65%. a. What is the opportunity cost of capital for an average-risk Whispering Pines investment? (Enter your answer as a percent rounded to 2 decimal places.) Opportunity cost of capital % b. Suppose the company issues debt, repurchases shares, and moves to a 24% debt-to-value ratio (D/ V = 0.24). What will be the company's weighted-average cost of capital at the new capital structure? The borrowing rate is 5.75% and the tax rate is 21%. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Weighted-average cost of capital

Question
Whispering Pines Inc. is all-equity-financed. The expected rate of return on the company's shares is 9.65%.
a. What is the opportunity cost of capital for an average-risk Whispering Pines investment? (Enter your answer as a percent rounded
to 2 decimal places.)
Opportunity cost of capital
%
b. Suppose the company issues debt, repurchases shares, and moves to a 24% debt-to-value ratio (D/ V = 0.24). What will be the
company's weighted-average cost of capital at the new capital structure? The borrowing rate is 5.75% and the tax rate is 21%. (Do not
round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Weighted-average cost of capital

Image Transcription

Whispering Pines Inc. is all-equity-financed. The expected rate of return on the company's shares is 9.65%. a. What is the opportunity cost of capital for an average-risk Whispering Pines investment? (Enter your answer as a percent rounded to 2 decimal places.) Opportunity cost of capital % b. Suppose the company issues debt, repurchases shares, and moves to a 24% debt-to-value ratio (D/ V = 0.24). What will be the company's weighted-average cost of capital at the new capital structure? The borrowing rate is 5.75% and the tax rate is 21%. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Weighted-average cost of capital

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