Question

Suman corporation manufactures specialty chemicals. Its debt-equity ratio is 8 per cent.
WACC is 15 per cent and its tax rate is 30 percent.
(a) If suman’s cost of equity is 20 percent, what is the pre-tax cost of debt?
(b) If suman can issue debt at an increased rate of 13 percent, what is the cost of equity?

Answer 1

Answer:

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