1) A firm has a debt-to-equity ratio of 1. Its cost of equity is 12%, and its cost of debt is 6%. If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were 0.
2) Using the information directly above, what is the market value of equity if the market value of debt is $1,000,000 and the cost of equity (levered) is 10.5%?