Welling Inc. has a target debt-equity ratio of 1.25. Its WACC is 9.2 percent, and the tax

Question:

Welling 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 Welling’s cost of equity is 14 percent, what is its pre-tax 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...

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