Wentworth Industries is 100 percent equity financed. Its current beta is 0.8. The expected market rate of return is 15 percent and the risk-free rate is 8 percent. Round your answers to two decimal places.

1. Calculate Wentworths cost of equity.

   %

2. If Wentworth changes its capital structure to 40 percent debt, it estimates that its beta will increase to 1. The after-tax cost of debt will be 13 percent. Should Wentworth make the capital structure change?

   Based on the weighted cost of capital of %, the capital structure -Select-should beshould not beItem 3 changed.