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Current Wd 25% Tax rate 25% Structure Ws 75% Cost of Equity 14.4% Other Rf 5% Tax rate 25% Factors Market Risk Premium 9.8% As

Current	Wd	25%	Tax rate	25%
Structure	Ws	75%
	Cost of Equity	14.4%

Other	Rf	5%	Tax rate	25%
Factors	Market Risk Premium	9.8%

As a CEO, you considering a change to your company's capital structure. The CFO believes the firm should increase the debt ratio (D/E) to 1.5.

What is the estimated cost of capital of the target capital structure with the average default spread is 170 bps?

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