Blue bull, Inc., has a target debt-equity ratio of .55. Its WACC is 10.50 percent, and the

Question:

Blue bull, Inc., has a target debt-equity ratio of .55. Its WACC is 10.50 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 the aftertax cost of the debt is 6.5 percent, what is the cost of equity?

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...