Simon software co. is trying to estimate its optimal capital structure. right now, simon has a capital structure that consists of 20% debt and 80% equity, based on market values. (its d/s ratio is 0.25.) the risk-free rate is 6% and the market risk premium, r m ï€ r rf, is 5%. currently the company's cost of equity, which is based on the capm, is 12% 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?
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Simon software co. is trying to estimate its optimal capital structure. right now, simon has a capit...
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