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Situational Software Co. (SSC) is trying to establish its optimal capitai structure. Its current capital structure consists of 25% debt and 75% equity; however, the
Situational Software Co. (SSC) is trying to establish its optimal capitai structure. Its current capital structure consists of 25% debt and 75% equity; however, the CEO believes that the firm should use more debt. The risk-free rate, ras, is 3%; the market risk premium, RPM, is 74 ; and the firm's tax rate is 40 , Currently, 55 if s. cett of equity is 16%, which is determined by the CAPM. What would be 55C s estimated cost of equity if it changed its capital structure to Sa\% debt and 50% equity? Do not round intermediate calculations. Round your answer to two decimal places
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