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What would be ssc estimated cost of equity

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Point 1: Situational Software Co. (SSC) is trying to establish its optimal capital structure. Its current capital structure consists of 20% debt and 30% equity; however, the CEO believes that the ?rm should use more debt. The risk-free rate, mg, is 3%, the market risk premium, RPM. is 3%, and the ?rm's tax rate is 25%. Currently, SSC‘s cost of equity is 15%, which is determined by the CAPM.

Question 1: What would be SSC's estimated cost of equity if it changed its capital structure to 50% debt and 50% equity? Do not round intermediate calculations. Round your answer to two decimal places.

Reference no: EM132490890

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