Christopher William, president of William Industries which produces widgets, has hired you to determine its cost of debt and the cost
of equity capital. The stock currently sells for $25 per share and the dividend will be 35. Christopher argues that it will cost us 35 per
share to use the stockholders money this year, therefore, the cost of equity is equal to 2096. Furthermore, Christopher believes that the
cost of debt is 2596. This is based upon the most recent financial statements which show that William Industries has total liabilities of
$10 million and will face total interest expenses for the year of $2.5 million. Christopher argues that the company should increase its
use of equity financing because debt costs 2596 while equity only costs 2096 and thus, equity is cheaper. Is Christopher’s analysis of
the cost of equity, debt, and decision to increase the use of equity financing over debt financing accurate? Defend your answers