Potter Inc. is trying to estimate its optimal capital structure. Right now, Potter Inc. has a capital structure that consists of 20 percent debt and 80 percent equity. The risk-free rate is 6 percent, and the market risk premium is 5 percent. Currently the company’s cost of equity, which is based on the CAPM, is 12 percent and its tax rate is 40 percent. What is the new levered beta given the new capital structure? a1.67 b1.039 c1.409 d1.24   What would be Potter Inc.’s estimated cost of equity if it were to change its capital structure to 50 percent debt and 50? a14.35% b30.00% c14.72% d15.60%

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