Dark Corp. has no debt but can borrow at 7 percent. The firm\'s WACC is currentl

Question

Dark Corp. has no debt but can borrow at 7 percent. The firm's WACC is currently 13 percent, and the tax rate is 36 percent. (round answers to 2 decimal places). I got (a) but cannot get the rest.

(a) Dark's cost of equity is 13 percent.

(b) If the firm converts to 25 percent debt, its cost of equity will be __________ percent.

(c) If the firm converts to 50 percent debt, its cost of equity will be __________ percent.

(d) Dark's WACC in parts (b) and (c) is __________ percent and __________ percent, respectivley.

Explanation / Answer

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