You are analyzing a firm that is financed with 55 percent debt and 45 percent equity. The current cost of debt financing is 10 percent, but due to a recent downgrade by the rating agencies, the firms cost of debt is expected to increase to 12 percent immediately.

How will this increase change the firms weighted average cost of capital if you ignore taxes? (Round answer to 2 decimal places, e.g. 15.25%.)

Ignoring taxes firm's weighted average cost of capital will decrease/increase by _____________ %.

If you consider taxes and the firm is subject to a 40 percent marginal tax rate? (Round answer to 3 decimal places, e.g. 15.250%.)

Considering taxes firm's weighted average cost of capital will decrease/increase by ____________ %