The Required Return on Equity for an All-Equity Firm Is

Multiple Choice

The required return on equity for an all-equity firm is 10.0 percent.They are considering a change in capital structure to a debt-to-equity ratio of 1/2,the tax rate is 40 percent,the pre-tax cost of debt is 8 percent.Find the new cost of capital if this firm changes capital structure.

A) 14.93 percent
B) 8.67 percent
C) 7.40 percent
D) none of the options