SA company is trying to estimate its optimal capital structure. Right now, it has a capital structure that consists of 20% debt and 80% equity, based on market values (its debt to equity D/S ratio is 0.25). The risk-free rate (rRF) is 6% and the market risk premium (rM rRF) is 5%. Currently the companys cost of equity, which is based on the CAPM, is 12% and its tax rate is 40%. Find the firms current leveraged beta using the CAPM

1.0

1.2

1.4

1.6

Use info above to find the firms unleveraged beta using the Hamada Equation

		1.0
		1.04
		1.08
		1.2

Use the information for above two question to find, what would be Simons new leveraged beta if it were to change its capital structure to 50% debt and 50% equity using the Hamada Equation?

		1.0
		1.04
		1.2
		1.67

Lastly, use the question and work above to find what would be Simons new cost of equity if it were to change its capital structure to 50% debt and 50% equity using the CAPM?

		12.8%
		13.6%
		14.3%
		15.8%