Page 78 example 3

The cost of debt is 7% because the question actually says that it is 7%! (We would only subtract 25% if 7% was the return to investors and the debt was irredeemable) Multiplying by 40/140 is part of combining it into the WACC.

Thank you John, But in page 79 example 4, the cost of debt is 8%, you deducted 30% of tax when WACC is calculated. Did I miss some ideas or confused?

That is my mistake and I will correct it. Thank you very much for pointing it out to me. The cost of debt should be 8% (because that it what is given in the question) and not 5.6%. (Again however, I do suggest that you watch the free lectures on the cost of capital).