QUESTION 33

1. Suppose you are trying to estimate the after tax cost of equity for a firm as part of the calculation of the Weighted Average Cost of Capital (WACC). If the risk-free rate is 4.3%, the expected market risk premium is 5.6%, the beta is 1.6 for this firm's equity, and the corporate tax rate is 30%, what would be the expected after tax cost of equity for this firm using CAPM? (Answer to the nearest tenth of a percent, but do not use a percent sign).

QUESTION 34

1. Suppose you are trying to estimate the after tax cost of debt for a firm as part of the calculation of the Weighted Average Cost of Capital (WACC). The corporate tax rate for this firm is 34%. The firm's bonds pay interest semiannually with a 4.8% coupon rate and have a maturity of 7 years. If the annual yield to maturity of the bonds is 6.51%, what is the after tax cost of debt for this firm? (Answer to the nearest hundredth of a percent, e.g. 12.34%, but do not use a percent sign)