Question 18

You start a business expecting to generate a year-end cash flow of $1.3 million. An equity investor offers you $980,000 for the business at the beginning of the year. What is the cost of unleveraged equity? (Enter using 2 decimal places or more)

Question 19

From Question 18, you decide to finance the business with $500,000 of debt at 8% interest. The tax rate is 32%, and the targeted capital structure ratio is 51/49. What is the cost of leveraged equity? (Enter using 2 decimal places or more)