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What is the firm cost of capital under current capital

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A) What is the firm's cost of capital under the current capital structure?

(1) Snow Fun Inc., a manufacturer of skis and snowboards, is 30% debt financed. Its current equity beta is 1.1 and its debt beta is 0. The company's cost of debt is 6%, and its tax rate is 35%. The risk-free rate is 4%, and market risk premium is 7%.

B) What is the firm's cost of equity if the firm were 40% financed? Is it higher or lower than the firm's current cost of equity? Why?

Reference no: EM133004148

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