A hotel owner is considering purchasing a fourth hotel. He borrows $8,000,000 from a bank, and agrees to pay the bank 7.5% interest and total debt service of $773,500 per year. He sells another $6,000,000 in equity to four investors in return for a 50% ownership stake in the new hotel. The projected annual cash flow before debt service is $2,933,500

Calculate the annual cost of debt, and the annual cost of equity, and show your work below.