14

Paget, Inc., has a target debtequity ratio of 1.35. Its WACC is 9.4 percent, and the tax rate is 40 percent.

a.	If the companys cost of equity is 16 percent, what is its pretax cost of debt? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Cost of debt

%

b.	If instead you know that the aftertax cost of debt is 6.4 percent, what is the cost of equity? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Cost of equity

%