8. Wentworth Industries is 100 percent equity financed. Its current

beta is 0.9. The expected market rate of return is 15 percent, and the

risk-free rate is 6 percent.

a. calculates Wentworth's cost of equity.

b. If Wentworth changes its capital structure to 30 percent debt, it

estimates that its beta will increase to 1.3. The after-tax cost of

debt will be 7 percent.

a.Should Wentworth make the capital structure change?