$1$

Problem $18\mathrm{.}3$

The Beta Corporation has an optimal debt ratio of $40$ percent. Its cost of equity capital is $10$ percent, and its before$-$tax borrowing rate is $7$ percent. Given a marginal tax rate of $35$ percent.

Requlred:

a$.$ Calculate the weighted$-$average cost of capital.

b$.$ Calculate the cost of equity for an equivalent all$-$equity financed firm.

Complete this question by entering your answers in the tabs below.

Calculate the cost of equity for an equivalent all$-$equity financed firm.

Note: Do not round intermediate calculations. Round your answer as a percent rounded to $2$ decimal places.

Cost of equity