Blue Ram Brewing Company currently has no debt in its capital structure, but it is considering adding some debt and reducing the percentage of outstanding equity in its capital structure. The firm's current (unlevered) beta is 1.30, and its cost of equity is 12.60. Because the firm has no debt in its capital structure, its weighted average cost of capital (WACC) also equals 12.60. The risk-free rate of interest (IRF) is 3.5%, and the market risk premium (RPM) is 7%. Blue Ram's marginal tax rate is 30%. Blue Ram is examining how different levels of debt will affect its costs of debt and equity, as well as its WACC. The firm has collected the financial information that follows to analyze its WACC. Complete the following table. Market debt to equity ratio wa) Market debt to equity ratio ( ws) Market debt to equity ratio D/S) Before-Tax Cost of Debt Bond Rating ra) Levered Beta (b) () 1.30 Cost of Equity (rs) ( 12.60% WACC 0.0 1.0 0.00 12.60% 0.2 0.8 0.25 A 8.40% 14.21% 12.54% 0.4 0.6 0.67 BBB 8.90% 1.91 16.87% 0.6 0.4 1.50 BB 11.10% 2.67 13.54% 0.8 0.2 14.30% 4.94 38.08%