Purchase Solution

Debt-equity ratio and calculating WACC

Not what you're looking for?

Ask Custom Question

A company has a debt-equity ratio of 1.5. Its WACC is 14%, and its cost of debt is 9%. There is no corporate tax.

A. What is the company's cost of equity capital?
B. What would the cost of equity be if the debt-equity ratio were 1.0? What if it were 0.5? What is it were 0?

Purchase this Solution

Solution Summary

The solution determines the debt equity ratio and calculates WACC.

Solution Preview

WACC = Re/V *cost of equity + Rd/V* cost of debt ( V = Re + Rd)

a) Given : Rd/Re = ...

Purchase this Solution

Free BrainMass Quizzes
Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Introduction to Finance

This quiz test introductory finance topics.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.


This tests some key elements of major motivation theories.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.