Your firm currently has a capital structure of $40\%$ debt and $60\%$ equity.

Your after$-$tax cost of debt is $6\%$ and your cost of equity is $13\%.$

You are considering increasing your use of debt to $50\%$;

if you do$,$ your after$-$tax cost of debt will be $8\%$ and your cost of equity will be $17\%.$

a$.$ What is your current value for K$?$

What will it be if you increase your debt usage to $50\%?$

b$.$ Use the numbers in part a to calculate the substitution effect and the component cost effect when L increases from $40\%$ to $50\%.$