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Question: Navarro Corp. has no debt but can


Navarro Corp. has no debt but can borrow at 5.9 percent. The firm’s WACC is currently 9.2 percent, and the tax rate is 21 percent.
a. What is the company’s cost of equity?
b. If the firm converts to 25 percent debt, what will its cost of equity be?
c. If the firm converts to 50 percent debt, what will its cost of equity be?
d. What is the company’s WACC in part (b)? In part (c)?


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