Question: ring a change m its target capital structure, which currently consists of 40% debt and ves the firm should use more debt, but the CEO

ring a change m its target capital structure, which currently consists of 40% debt and ves the firm should use more debt, but the CEO is reluctant to increase the debt ratio. The the market risk premium, RP , s 11.0% and the firm's tax rate is 35%. Currently, the cost 2. Stephens Electronics is consider risk-free rate, r F, s 8.0%, ' / as determined by the CAPM. Whatw ould be the estimated cost of equity if the firm used 70% '' debt? A. 20.29% B. 33.25% C. 37.99% D. 30.35

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