1. A firm currently has a debt-equity ratio of 1. The debt, which is virtually riskless, pays an interest rate of 5 %. The expected rate of return on equity is 10 %. What is the Weighted-Average Cost of Capital if the firm pays no taxes?

ANSWER=7.5%

2. What would happen to the expected rate of return on equity if the firm changed its debt-equity ratio to 2/5? Assume the firm pays no taxes, the cost of debt does not change, and that the original WACC is 7.50 %

Looking for question 2 answer, thanks.