Fama's Llamas has a weighted average cost of capital of 12.5 percent. The company's cost of equity is 17 percent, and its pretax cost of debt is 7 percent. The tax rate is 34 percent. What is the company's target debt-equity ratio?

Stock in Country Road Industries has a beta of 0.91. The market risk premium is 7.5 percent, and T-bills are currently yielding 5 percent. The company's most recent dividend was $1.7 per share, and dividends are expected to grow at a 5 percent annual rate indefinitely. If the stock sells for $37 per share, what is your best estimate of the company's cost of equity