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Problem 14-14 WACC [LO3] Fyre, Inc., has a target debtequity ratio of 1.45. Its WACC is 8.1 percent, and the tax rate is 40 percent.
Problem 14-14 WACC [LO3]
Fyre, Inc., has a target debtequity ratio of 1.45. Its WACC is 8.1 percent, and the tax rate is 40 percent. |
a. | If the companys cost of equity is 16 percent, what is its pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
Cost of debt | % |
b. | If instead you know that the aftertax cost of debt is 4 percent, what is the cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
Cost of equity | % |
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