Question
Starset, Inc., has a target debt-equity ratio of .85. Its WACC is 9.1 percent, and the tax rate is 23 percent. a. If the companys
Starset, Inc., has a target debt-equity ratio of .85. Its WACC is 9.1 percent, and the tax rate is 23 percent.
a. If the companys cost of equity is 14 percent, what is its pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. If instead you know that the aftertax cost of debt is 6.5 percent, what is the cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a.Cost of debt_______%
b.Cost of equity______%
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