Clifford, Inc., has a target debt–equity ratio of .85. Its WACC is 8.4 percent, and the tax rate is 35 percent.
a. If the company’s cost of equity is 12.5 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.)
Pretax cost of debt %
b. If the aftertax cost of debt is 5.1 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.)
Cost of equity %