27. Pencert Corporation does not currently have any debt. Its tax rate is .35 and its unlevered beta is estimated by examining comparable companies to be 2.3. The 10-year Treasury bond rate is 5.5% and the historical risk premium over the risk free rate is 4.6%. Next year, Pencert expects to borrow up to 70% of its equity value to fund future growth.

1. Calculate the firm's current cost of equity.

2. Estimate the firm's cost of equity after it increases its leverage to 70% of equity?

Answer in 4 decimal places.

Show your work if you can, for partial credit.