Question: ABC software is trying to establish its optimal capital structure. It currently has 30% debt and 70% equity. However, the firm CEO believes that the

ABC software is trying to establish its optimal capital structure. It currently has 30% debt and 70% equity. However, the firm CEO believes that the firm should use more debt. The risk-free rate is 3% and the market risk premium is 6%. The firm's tax rate is 30% and the cost of equity is 12%, as determined by the CAPM. Assume that the firm changed its capital structure to 45% debt and 55% equity. How much should be the new cost of equity for this company?

Enter your answer in the following format: 0.1234; Hint #1: Answer is between 0.1251 and 0.1442

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