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Ssc estimated cost of equity

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Situational Software Co. (SSC) is trying to establish its optimal capital structure. Its current capitial structure consists of 25% debt and 75% equity; however the CEO believes that the firm should use more debt. The risk free rate, tRF is 4%, the market risk premium, RPm is 5%; and the firm's tax rate is 40%. Currently, SSC's cost of equity is 12%, which is determined by the CAPM. What would be SSC's estimated cost of equity if it changed its capital structure to 40% debt and 60% equity?

Reference no: EM131922201

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