Wentworth Industries is 100 percent equity financed. Its current beta is 0.7. The expected market rate of return is 18 percent and the risk-free rate is 6 percent. Round your answers to two decimal places.

1. Calculate Wentworths cost of equity.

   %

2. If Wentworth changes its capital structure to 20 percent debt, it estimates that its beta will increase to 0.9. The after-tax cost of debt will be 10 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.