Paget, Inc., has a target debt-equity ratio of 1.50. Its WACC is 8.0 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 and round your final answer 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 and round your final answer to 2 decimal places. (e.g., 32.16)) Cost of equity
Paget, Inc., has a target debt-equity ratio of 1.50. Its WACC is 8.0 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 and round your final answer 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 and round your final answer to 2 decimal places. (e.g., 32.16)) Cost of equity
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Paget, Inc., has a target debt-equity ratio of 1.50. Its WACC is 8.0 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 and round your final answer 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 and round your final answer to 2 decimal places. (e.g., 32.16))
Cost of equity
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