ABC company has a cost of equity of 10% EBIT is 100. They currently have no debt. Find the new cost of equity if they changed to using a capital structure that used 40% debt and 60% equity. The interest rate on the debt is 40% and the tax rate is 35%

Comment Question 2 ABC Company has a cost of equity of 10%. EBIT is 100. They currently have no debt. Find the new cost of Complete hak3.00ourn debt is 4% and the tax rate is 35%. 5.00 equity if they changed to using a capital structure that used 40% debt and 60% equity. The interest rate on the .10-(60 x New Cost of equity)+ (40 x .04) x (1 35) .10 (.60 New Cost of equity) + 1.04 .10-1.04-L60 New Cost of equity) Cost of new Equity-086/.60 14.93% Cost of new equity is 14.93%. Comment Question 3How might the firm's level of business risk affect the optimal capital structure? Complete Business risk is the possibility that a firm may not have the funds to cover operating expenses. It is a risk inherent in the firm's operations , which arises from uncertainty about future operating profits and capital requirements. If a high percentage of a firm's costs are fixed and hence do not declinewhen demand falls, then the firm has high operating leverage, which increases its business risk 4.00 out of 5.00 Comment