WACC Kose, Inc., has a target debt- equity ratio of .65. Its WACC is 11.2 percent, and the tax rate is 35 percent. a. If Kose's cost of equity is 15 percent, what is its pretax cost of debt? b. If instead you know that the aftertax cost of debt is 6.4 percent, what is the cost of equity?

WACC Kose, Inc., has a target debt- equity ratio of .65. Its WACC is 11.2 percent, and the tax rate is 35 percent. a. If Kose's cost of equity is 15 percent, what is its pretax cost of debt? b. If instead you know that the aftertax cost of debt is 6.4 percent, what is the cost of equity?

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 12EP

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Question

WACC Kose, Inc., has a target debt-
equity ratio of .65. Its WACC is 11.2
percent, and the tax rate is 35 percent.
a. If Kose's cost of equity is 15 percent,
what is its pretax cost of debt?
b. If instead you know that the aftertax
cost of debt is 6.4 percent, what is the
cost of equity?

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