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A company currently has no debt and its beta is 1.20. Its tax rate is 35%. The manager wants to change the capital structure. The
A company currently has no debt and its beta is 1.20. Its tax rate is 35%. The manager wants to change the capital structure. The expected debt is 40% and equity is 60%. If the market risk premium is 7.0%, and the risk-free rate is 6.0%, what is the change of the company's cost of equity?
| a. 3.451% | ||
| b. 3.640% | ||
| c. 3.892% | ||
| d. 3.910% | ||
| e. 3.968% |
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