42. A company is estimating its optimal capital structure. Now the company has a capital structure that consists of 20% debt and 80% equity, based on market values (debt to equity D/S ratio is 0.25). The risk-free rate (rRF) is 5% and the market risk premium (rM – rRF) is 6%. Currently the company’s cost of equity, which is based on the CAPM, is 14% and its tax rate is 20%. Find the firm’s current leveraged beta using the CAPM     1.0     1.5     1.6     1.7 Question 43 Based on the information from Question 42, find the firm’s unleveraged beta using the Hamada Equation     0.95     1.0     1.25     1.35 Question 43 Based on the information from Question 42, find the firm’s unleveraged beta using the Hamada Equation     0.95     1.0     1.25     1.35 Question 44 Based on the information from Question 42 and 43, what would be the company’s new leveraged beta if it were to change its capital structure to 50% debt and 50% equity (D/S=1.0) using the Hamada Equation?     1.25     1.35     1.95     2.25

A firm's cost of equity Ue) is 25%. Its before-tax cost of debt is 12%, and itsmarginal tax rate is 40%. The firm's capital structure calls for a debt-to-equityratio of 40%. Calculate the firm's cost of capital (k).

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Situational Software Co. (SSC) is trying to establish its optimal capital 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, faF, is 3%; the market risk premium, RPM, is 5%; and the firm's tax rate is 40%. Currently, SSC's cost of equity is 15%, 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. Open spreadsheet 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. Check My Work Reset Problem @om ई