1. What is the difference between valuing a debt security and valuing the equity of a company? Explain

2. Assume interest rate on a company's debt is 6% and that the company's tax rate is 35%. Compute the cost of debt capital. Show your calculation.

3. Assume that a company's market beta equals 0.8, the risk-free rate is 5%, and the market return equals 8%. Compute the company's cost of equity capital. Show your calculation.