Question 1:

The management team of Alcaraz Industries has approved a target debt-equity ratio of 0.79. Its WACC is 9.8%, and the tax rate is 35%.

a. If the company's cost of equity is 14%, what is its pre-tax cost of debt? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Cost of debt %

b. If instead you know that the after-tax cost of debt is 6.8%, what is the cost of equity? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Cost of equity %