Situational Software Co. (SSC) is trying to establish its optimal capital structure. Its current capital structure consists of 35% debt and 65% equity; however, the CEO believes that the firm should use more debt. The risk-free rate, r_RF, is 6%; the market risk premium, RP_M, is 6%; and the firm's tax rate is 40%. Currently, SSC's cost of equity is 16%, which is determined by the CAPM. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.

What would be SSC's estimated cost of equity if it changed its capital structure to 50% debt and 50% equity? Round your answer to two decimal places. Do not round intermediate steps.

fill in the blank 2

A B D 35.00% 65.00% 6.00% 6.00% 40.00% 16.00% Formulas #N/A 1 Hamada equation 2 3 Original % debt in capital structure, Wd 4 Original % common equity in capital structure, we 5 Risk-free rate, PRE 6 Market risk premium, RPM 7 Tax rate, T 8 Firm's cost of equity, rs 9 10 Calculation of firm's current beta: 11 Firm's current beta, bu 12 13 Calculation of firm's unlevered beta: 14 Firm's unlevered beta, bu 15 16 New % of debt in capital structure, Wd New 17 New % of common equity in capital structure, W. New 18 19 Calculation of firm's new beta: 20 Firm's new beta, bl New 21 22 Calculation of firm's new cost of equity: 23 Firm's new cost of equity, Is New #N/A 50.00% 50.00% #N/A #N/A