1. Dominosa, Inc. wants to have a weighted average cost of capital of 8.7 percent. The firm has an aftertax cost of debt of 5 percent and a cost of equity of 11.8 percent. What debt ratio is needed for the firm to achieve their targeted weighted average cost of capital? Enter answer in percents.
2. GIMP Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 2 years to maturity that is quoted at 105 percent of face value. The issue makes annual payments and has an embedded cost (coupon rate) of 9.8 percent annually. What is the firm's pretax cost of debt? (Enter answer in percents.)