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Mathematics, 05.09.2021 15:50 kidzay

Shayan Industrial Corporation (SIC) is considering a large-scale recapitalization. Currently, SIC is financed with 25% debt and 75% equity. SIC is considering increasing its level of debt until it is financed with 60% debt and 40% equity. The beta on its common stock at the current level of debt is 1.5, the risk-free rate is 6%, the market risk premium is 4%, and SIC faces a 40% federal-plus-state tax rate. a. What is SIC’s current cost of equity? b. What is SIC’s unlevered beta? c. What will be the new beta and new cost of equity if SIC recapitalizes?

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Shayan Industrial Corporation (SIC) is considering a large-scale recapitalization. Currently, SIC is...
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