Laramie Trucking's CEO is considering a change to the company's capital structure, which currently consists of 25%

Question:

Laramie Trucking's CEO is considering a change to the company's capital structure, which currently consists of 25% debt and 75% equity. The CFO believes the firm should use more debt, but the CEO is reluctant to increase the debt ratio. The risk-free rate, rRF, is 5.0%, the market risk premium, RPM, is 6.0%, and the firm's tax rate is 40%. Currently, the rs, is 11.5% as determined by the CAPM. What would be the estimated if the firm used 60% debt? (Hint: You must first find the current beta and then the unlevered beta to solve the problem
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...