Kose, Inc., has a target debt–equity ratio of 1.55. Its WACC is 7.9 percent, and the tax rate is 38 percent.
a. If the company’s cost of equity is 15 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.)
Cost of debt %
b. If instead you know that the aftertax cost of debt is 4.2 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 %