Paget, Inc., has a target debt-equity ratio of 1.50. Its WACC is 8.0 percent, and the tax rate is 35 percent. a. If the company's cost of equity is 14 percent, what is its pretax cost of debt? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Cost of debt b. If instead you know that the aftertax cost of debt is 4.1 percent, what is the cost of equity? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Cost of equity

Paget, Inc., has a target debt-equity ratio of 1.50. Its WACC is 8.0 percent, and the tax rate is 35 percent. a. If the company's cost of equity is 14 percent, what is its pretax cost of debt? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Cost of debt b. If instead you know that the aftertax cost of debt is 4.1 percent, what is the cost of equity? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Cost of equity

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Kose, Inc., has a target debt-equity ratio of 1.31. Its WACC is 8.1 percent, and the tax rate is 22 percent. a. If the company’s cost of equity is 12 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 5.8 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.)
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Starset, Inc., has a target debt-equity ratio of .80. Its WACC is 9.1 percent, and the tax rate is 25 percent. a.If the company's cost of equity is 13 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 5.8 percent, what is the cost of equity?
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