Question 2: Due to mismanagement, Pakistan Steel Mills is currently over levered with a debt to capital ratio of 80% and a pre-tax cost of debt of 8%. Management of Pakistan Steel Mills is considering a restructuring that will reduce the company's debt to capital ratio to 40% and its pre-tax cost of debt to 6%. Debt/(Debt+Equity) Cost of Debt (pre-tax) Cost of Equity Current 80% 8% 24.10% Recapitalized 40 % 6% If the marginal tax rate is 25%, the risk free rate is 2.5%, and the equity risk premium is 6%, estimate the cost of capital after the restructuring. [30 Marks]