Garcia Company has no debt. Its cost of capital is 11.2 percent Suppo ate on the debt is 8.3 percent. Ignore taxes for this problem. e. What is the company's new cost of equity? Note: 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? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Cost of equity b. WACC %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Garcia Company has no debt. Its cost of capital is 11.2 percent. Suppose the company converts to a debt-equity ratio of 1. The interest
rate on the debt is 8.3 percent. Ignore taxes for this problem.
e. What is the company's new cost of equity?
Note: 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?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
a. Cost of equity
b. WACC
%
%
Transcribed Image Text:Garcia Company has no debt. Its cost of capital is 11.2 percent. Suppose the company converts to a debt-equity ratio of 1. The interest rate on the debt is 8.3 percent. Ignore taxes for this problem. e. What is the company's new cost of equity? Note: 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? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Cost of equity b. WACC % %
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