Question: Given data Leveraged Beta 2 . 5 Tax Rate 3 0 % Debt / Equity Ratio 1 . 5 0 Rf = 3 % (

Given data

Leveraged Beta

2.5

Tax Rate

30 %

Debt

/

Equity Ratio

1.50

= 3 % (

-

) = 7 %

= 8 %

Given that the tax rate changes to

40 %,

please find the new cost of equity. Hint: Please first find the unleveraged beta, now find the new beta with the changed tax rate, and then find the new cost of equity.

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