Malkin Corp. has no debt but can borrow at 6.5%. The firm's WACC is currently 10%, and there is no corporate tax.
(a) What is Malkin's cost of equity?
(b) If the firm converts to 30% debt, what will its cost of equity be?
(c) If the firm converts to 55% debt, what will its cost of equit be?
(d) What is Malkin's WACC in part (b) and part (c)?