Question: Please show work on how to calculate the answer. Question 5 0 / 5 pts A firm is currently unlevered. Its equity Beta is 1.16.

Please show work on how to calculate the answer.

Question 5

0 / 5 pts

A firm is currently unlevered. Its equity Beta is 1.16. Assume the company will change its capital structure to a debt-equity ratio of 0.25 which it will maintain forever. The cost of debt will be 3%. The company's tax rate is 20%. The risk-free rate is 4%, and the expected market return is 11%. After the recap, the cost of equity (Re) will be _______%.

Correct Answer: 14.4

(I dont know how to get this answer???)

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