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Blue Bull, Inc., has a target debt-equity ratio of .87. Its WACC is 8.6 percent, and the tax rate is 30 percent.
Required:
(a) If the company’s cost of equity is 12.7 percent, what is its pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Pretax cost of debt %
(b) If the aftertax cost of debt is 5.3 percent, what is the cost of equity?
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