Delta Corporation (DC) is considering a large-scale recapitalization. Currently, DC is financed with 20% debt and...

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Delta Corporation (DC) is considering a large-scale recapitalization. Currently, DC is financed with 20% debt and 80% equity. DC is considering increasing its level of debt until it is financed with 60% debt and 40% equity. The beta on its common stock at the current level of debt is 1.5, the risk-free rate is 6%, the market risk premium is 4%, and DC faces a 40% tax rate. Instruction: a. What is DC's current cost of equity? b. What is DC's unlevered beta? c. What will be the new beta and new cost of equity if DC recapitalizes? (3 Marks) (3 Marks) (9 Marks) Delta Corporation (DC) is considering a large-scale recapitalization. Currently, DC is financed with 20% debt and 80% equity. DC is considering increasing its level of debt until it is financed with 60% debt and 40% equity. The beta on its common stock at the current level of debt is 1.5, the risk-free rate is 6%, the market risk premium is 4%, and DC faces a 40% tax rate. Instruction: a. What is DC's current cost of equity? b. What is DC's unlevered beta? c. What will be the new beta and new cost of equity if DC recapitalizes? (3 Marks) (3 Marks) (9 Marks)