Welling Inc. has a target debt–equity ratio of 0.75. Its WACC is 9.3%, and the tax rate is 35%.

 

a. If the company’s cost of equity is 14%, what is its pre-tax cost of debt? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

 

Cost of debt             %

 

b. If instead you know that the after-tax cost of debt is 6.8%, what is the cost of equity? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

 

Cost of equity             %

 

Blue Bull, Inc., has a target debt-equity ratio of .81. Its WACC is 8.5 percent, and the tax rate is 34 percent. Required: (a) If the company’s cost of equity is 12.1 percent, what is its pretax cost of debt?(Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Pretax cost of debt % (b) If the aftertax cost of debt is 5.2 percent, what is the cost of equity? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Cost of equity %

Problem 12-14 WACC [LO 3] Blue Bull, Inc., has a target debt-equity ratio of .71. Its WACC is 8.5 percent, and the tax rate is 34 percent.

Required: (a) If the company’s cost of equity is 11.1 percent, what is its pretax cost of debt?(Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Pretax cost of debt %

(b) If the aftertax cost of debt is 5.3 percent, what is the cost of equity? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Cost of equity %