Air Seattle is looking at changing its capital structure from an all-equity firm to a leveraged firm

Question:

Air Seattle is looking at changing its capital structure from an all-equity firm to a leveraged firm with 50% debt and 50% equity. Air Seattle is a not-for-profit company and therefore pays no taxes. If the required rate on the assets of Air Seattle is 20% (RA), what is the current required cost of equity and what is the new required cost of equity if the cost of debt is 10%?

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...