A firm is considering making a change to its capital structure to reduce its cost of capital and increase firm value. Right now, it has a capital structure that consists of $20\%$ debt and $80\%$eQuestion $5$

A firm is considering making a change to its capital structure to reduce its cost of capital and increase firm value. Right now, it has a capital structure that consists of $20\%$ debt and $80\%$

equity, based on market values. The risk$-$free rate is $6\%$ and the market risk premium is $5\%$ Currently the company's cost of equity, which is based on the CAPM, is $12\mathrm{.}5\%$ and its tax rate

is $40\%.$ What would be Cartwright's estimated cost of equity if it were to change its capital ructure to $30\%$ debt and $70\%$ equity?

a$.16\mathrm{.}74\%$

b$.13\mathrm{.}10\%$

c$.15\mathrm{.}04\%$

d$.13\mathrm{.}91\%$

e$.13\mathrm{.}48\%$quity, based on market values. The risk$-$free rate is $6\%$ and the market risk premium is $5\%.$ Currently the company's cost of equity, which is based on the CAPM, is $12\mathrm{.}5\%$ and its tax rate is $40\%.$ What would be Cartwright's estimated cost of equity if it were to change its capital structure to $30\%$ debt and $70\%$ equity?

$$ a$.16\mathrm{.}74\%$

$$ b$.13\mathrm{.}10\%$

$$ c$.15\mathrm{.}04\%$

$$ d$.13\mathrm{.}91\%$

$$ e$.13\mathrm{.}48\%$