UNLEVERED BETA

Hartman Motors has $8 million in assets, which were financed with $2.4 million of debt and $5.6 million in equity. Hartman's beta is currently 0.65, and its tax rate is 30%. Use the Hamada equation to find Hartman's unlevered beta, b_U. Do not round intermediate calculations. Round your answer to two decimal places.

HAMADA EQUATION

Situational Software Co. (SSC) is trying to establish its optimal capital structure. Its current capital structure consists of 20% debt and 80% equity; however, the CEO believes that the firm should use more debt. The risk-free rate, r_RF, is 3%; the market risk premium, RP_M, is 7%; and the firm's tax rate is 40%. Currently, SSC's cost of equity is 16%, 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? Round your answer to two decimal places. Do not round intermediate steps.