You are trying to estimate the cost of capital for La Coste, an upscale specialty retailer. The firm is in only one business, specialty retailing; comparable firms have an average published beta of 1.2, an average debt ratio of 30% and an average tax rate of 40%. The firm has provided you with the following information: The regression beta is 0.85 with a standard error of 0.5. The firms bonds are rated A, and the default spread for A rated bond is 0.01. The company plans to maintain its current debt ratio of 20%. The Treasury bond rate is 0.052 and the equity risk premium is 0.054. The tax rate for La Coste is 40%.

What is La Coste's before tax cost of debt?

What is La Coste's after tax cost of debt?