Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance For IT Decision Makers

Authors: Michael Blackstaff

1st Edition

3540762329, 978-3540762324

More Books

Students also viewed these Finance questions

Question

How can the Internet be helpful in a job search? (Objective 2)

Answered: 1 week ago