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What would be cartwright estimated cost of equity

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Reference no: EM133157684

Question - Cartwright Communications is considering making a change to its capital structure to reduce its cost of capital and increase firm value. Right now, Cartwright has a capital structure that consists of 20% debt and 80% equity, based on market values. (Its D/S ratio is o.25.) The risk-free rate is 6% and the market risk premium, I'M - [RF, is 5%. Currently the company's cost of equity, which is based on the CAPM, is 12% and its tax rate is 25%. What would be Cartwright's estimated cost of equity if it were to change its capital structure to 50% debt and 50% equity?

Reference no: EM133157684

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