Problem:
Shadow Corp. has no debt but can borrow at 6.9%. The firm's WACC is currently 8.7%, and the tax rate is 35%.
Requirement:
Question 1: What is Shadow's cost of equity? (Percentage)
Question 2: If the firm converts to 35% debt, what will it cost of equity be? (Percentage)
Question 3: If the firm converts to 35% debt, what will the company's WACC be? (Percentage)
Question 4: If the firm converts to 40% debt, what will the company's WACC be?
Note: Please solve the given numerical and provide appropriate solution.