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 _______%.

Margin of error for correct responses: +/- .03%

Rounding and Formatting instructions: Do not enter dollar signs, commas, or % signs in your response. Do not round any intermediate work, but round your *final* response to 2 decimal places (example: if your answer is 12.34567%, you should enter 12.35).

You Answered:

92.8

Correct Answer:

14.4