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Problem 1 4 - 1 4 WACC [ LO 3 ] Ursala, Incorporated, has a target debt - equity ratio of . 8 5 .

Problem 14-14 WACC [LO3]
Ursala, Incorporated, has a target debt-equity ratio of .85. Its WACC is 8.1 percent, and
the tax rate is 21 percent.
a. If the company's cost of equity is 12 percent, what is its pretax cost of debt? (Do not
round intermediate calculations and enter your answer as a percent rounded to 2
decimal places, e.g.,32.16.)
b. If instead you know that the aftertax cost of debt is 6.2 percent, what is the cost of
equity? (Do not round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g.,32.16.)
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