Question
Starset, Inc., has a target debt-equity ratio of 0.85. Its WACC is 11.5 percent, and the tax rate is 33 percent. 1. If the company's
Starset, Inc., has a target debt-equity ratio of 0.85. Its WACC is 11.5 percent, and the tax rate is 33 percent.
1. If the company's cost of equity is 16 percent, what is the pretax cost of debt?
2. If instead you know that the aftertax cost of debt is 5.8 percent, what is the cost of equity?
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Intermediate Accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
9th Edition
125972266X, 9781259722660
