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Change of the company cost of equity

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A company currently has no debt and its beta is 1.20. Its tax rate is 35%. The manager wants to change the capital structure. The expected debt is 40% and equity is 60%. If the market risk premium is 7.0%, and the risk-free rate is 6.0%, what is the change of the company's cost of equity?

  • 3.451%
  • 3.640%
  • 3.892%
  • 3.910%
  • 3.968%

Reference no: EM131317301

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