5. 6. XYZ Corp has an equity beta of 1.2. If the risk free rate equals 2% and the expected return on the market is equal to 8%. Calculate XYZ Corp's expected cost of equity. If XYZ Corp's pre-tax cost of debt is equal to 4% and XYZ Corp's capital structure consists out of 40% debt, determine XYZ Corp's WACC. The tax rate is 30%. How would XYZ Corp's cost of equity change if XYZ Corp intends to change it's debt- to-capital ratio to 50% (HINT: Calculate XYZ Corp's Business Beta)? 7