Question: Simon Software Co. is trying to estimate its optimal capital structure. Right now, Simon has a capital structure that consists of 0% debt and 100%

Simon Software Co. is trying to estimate its optimal capital structure. Right now, Simon has a capital structure that consists of 0% debt and 100% equity. The risk-free rate is 6% and the market risk premium, RMRr, is 5%. Currently the company's beta with no debt is 1.20 and its tax rate is 40%. What would be Simon's estimated cost of equity if it were to change its capital structure to 50% debt and 50% equity? 16.82% 13.64% 13.00% 15.60%

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