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What would be the company new cost of common equity

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Question - The company is considering changing its capital structure to 50 percent debt and 50 percent common equity. To make this change, the company would issue additional debt and use the proceeds to repurchase common stock. If the firm adopts this change, its total interest expense would now be $200,000. Assume that all common shares will be repurchased at $16 a share, which is slightly above the current stock price of $15.3488. What would be the company's new cost of common equity if the company adopts the new capital structure?

a. 11.23%

b. 11.71%

c. 12.25%

d. 12.67%

e. 13.00%

Reference no: EM132956337

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