German Engineering is financed with both equity and debt and has weighted average cost of capital (WACC) of 15%. German Engineering's current debt-equity ratio is 2.50, cost of debt is 10%, and is subject to 35% corporate tax rate.

Required:

i. What is German Engineerings levered cost of equity capital?

ii. What is German Engineerings unlevered cost of equity capital?

iii. What would be German Engineerings cost of levered equity and weighted average cost of capital, if the firms debt-equity ratio were 0.75? What if it were 1.5?

iv. Compare the costs of levered equity and weighted average costs of capital under all three scenarios with the unlevered cost of equity capital in the context of financial risk. (Word limit: 100)

Please show all calculations