Valley Imports Inc. has the following financial information available:
Risk-free rate of return = 4.00%
Market rate of return = 13.00%
Before Tax Cost of debt = 7.50%
Tax rate = 40%
Debt/Total Value (i.e., D/V) = 30%
Beta = 1.40
6. What is Valley Import’s cost of equity?
a. 12.60% b. 16.60% c. 11.62% d. 4.98%
7. What is Valley Import’s after-tax cost of debt?
a. 4.50% b. 1.35% c. 2.45% d. 3.70%