Question: Air Seattle is looking at changing its capital structure from
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%?
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