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Firm estimated cost of equity

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Corrigan Inc. is trying to establish its optimal capital structure. Its current capital structure consists of 20% debt and 80% equity; however, the CEO believes the firm should use more debt. The risk-free rate, rRF, is 3%, the market risk premium, RPm, is 6%, and the firm's tax rate is 40%. Currently, the firm's cost of equity is 9.21%, which is determined by the CAPM. What would be the firm's estimated cost of equity if it changed its capital structure to 40% debt and 60% equity?

Reference no: EM132066778

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