An unlevered company with a cost of debt of 8% and a cost of equity of 15% is considering borrowing funds. The borrowed funds would be used to repurchase shares, resulting in a D/E ratio of 1.3 for the company. Assume all available earnings are immediately distributed to common shareholders and all the M&M assumptions are satisfied except the company's corporate tax rate is 30%. According to M&M Proposition II with taxes, what will be this company's cost of equity if it proceeds with the capital restructuring?

Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit the % sign in your response. For example, an answer of 15.39% should be entered as 15.39.

Answer rating: 100% (QA)

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