Horford Co. has no debt. Its cost of capital is 8.9 percent. Suppose the company
converts to a debt-equity ratio of 1.0. The interest rate on the debt is 5.7 percent. Ignore
taxes for this problem.
a. What is the company's new cost of equity? (Do not round intermediate calculations
and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)
b. What is its new WACC? (Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e. g., 32.16.)
Answers: 3
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Horford Co. has no debt. Its cost of capital is 8.9 percent. Suppose the company
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