According to Modigliani and Miller (M&M), in a world of perfect capital markets, what will be the expected equity return (or cost of equity) for a firm that has a cost of capital of 10.7 percent, a cost of debt of 5.5 percent, debt valued at $ 1.18 million, and equity valued at $ 1.01 million? How will your answer change if we now relax the M&M perfect capital markets assumption and incorporate a corporate tax rate of 35 percent?

In the first case, the expected equity return is %. (Round to one decimal place.)

In the second case, the expected equity return is %. (Round to one decimal place.)