Target debt-equity ratio-what is its pretax cost of debt

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Reference no: EM13923070

Fyre, Inc., has a target debt−equity ratio of 1.50. Its WACC is 8 percent, and the tax rate is 35 percent.

a. If the company’s cost of equity is 14 percent, what is its pretax cost of debt? (Do not round intermediate calculations. 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 4.1 percent, what is the cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Cost of equity %

Reference no: EM13923070

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