Paget, Inc., has a target debtequity ratio of 1.25. Its WACC is 9.2 percent, and the tax

Question:

Paget, Inc., has a target debt−equity ratio of 1.25. Its WACC is 9.2 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?

b. If instead you know that the after tax cost of debt is 6.8 percent, what is the cost of equity?

Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...