Assume that TJX changes its capital structure so that its market value weight of debt to capital

Question:

Assume that TJX changes its capital structure so that its market value weight of debt to capital increases to 30%, and its after-tax interest rate on debt at this new leverage level is 3.5%. Assume that the equity market risk premium is 6.7%. What will be the cost of equity at the new debt level? What will be the new weighted average cost of capital?

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 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...