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Situational Software Co . ( SSC ) is trying to establish its optimal capital structure. Its current capital structure consists of 4 0 % debt

Situational Software Co.(SSC) is trying to establish its optimal capital structure. Its current capital structure consists of 40% debt and 60% equity; however, the CEO believes that the firm should use more debt. The risk-free rate, rRF, is 5%; the market risk premium, RPM, is 6%; and the firm's tax rate is 25%. Currently, SSC's cost of equity is 14%, which is determined by the CAPM. What would be SSC's estimated cost of equity if it changed its capital structure to 50% debt and 50% equity?

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