Currently, Meyers Manufacturing Enterprises (MME) has a capital structure consisting of 35% debt and 65% equity. MME's debt currently has a 7.5% yield to maturity. The risk-free rate (r_RF) is 5.5%, and the market risk premium (r_M r_RF) is 6.5%. Using the CAPM, MME estimates that its cost of equity is currently 12.5%. The company has a 40% tax rate.

a. What is MME's current WACC? Round your answer to 2 decimal places. Do not round intermediate calculations. %

b. What is the current beta on MME's common stock? Round your answer to 4 decimal places. Do not round intermediate calculations.

c. What would MME's beta be if the company had no debt in its capital structure? (That is, what is MME's unlevered beta, b_U?) Round your answer to 4 decimal places. Do not round intermediate calculations

MME's financial staff is considering changing its capital structure to 45% debt and 55% equity. If the company went ahead with the proposed change, the yield to maturity on the company's bonds would rise to 8%. The proposed change will have no effect on the company's tax rate.

d. What would be the company's new cost of equity if it adopted the proposed change in capital structure? Round your answer to 2 decimal places. Do not round intermediate calculations. %

Realize that you will use the CAPM equation to solve for the cost of equity.

Before you can solve for the cost of equity, you need to calculate the levered beta at the new capital structure.

Refer back to the Hamada equation to determine data needed to solve it.

Make sure that you use the new capital structure weights in the equation to solve for b_L.

Be careful about the mathematical order of operations in last part of equation. Solve parentheses first, then multiply, and then add. Then you can do the last multiplication to solve for b_L. Now you have b_L for the CAPM equation to solve for the cost of equity under the new capital structure.

e. What would be the company's new WACC if it adopted the proposed change in capital structure? Round your answer to 2 decimal places. Do not round intermediate calculations. %