What would be cyclone estimated cost of equity

Reference no: EM13290711

Cyclone Software Co. is trying to establish its optimal capital structure. Its current capital structure consists of 40% debt and 60% 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, Cyclone's cost of equity is 16%, which is determined by the CAPM. What would be Cyclone's estimated cost of equity if it changed its capital structure to 50% debt and 50% equity? Round your answer to two decimal places.

Reference no: EM13290711

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