10

Wentworth Industries is 100 percent equity financed. Its current beta is 0.7. The expected market rate of return is 18 percent and the riskfree rate is 7 percent. Round your answers to two decimal places. a. Calculate Wentworth's cost of equity. % b. If Wentworth changes its capital structure to 30 percent debt, it estimates that its beta will increase to 0.9. The after-tax cost of debt will be 12 percent. Should Wentworth make the capital structure change? Based on the weighted cost of capital of %, the capital structure changed