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Situational Software Co. (SSC) is trying to establish itsoptimal capital structure. Its current capital structure consistsof 25% debt and 75% equity; however, the CEO believes that the firmshould use more debt. The risk-free rate, rRF, is 4%;the market risk premium, RPM, is 6%; and the firm's taxrate is 40%. Currently, SSC's cost of equity is 12%, which isdetermined by the CAPM. The data has been collected in theMicrosoft Excel Online file below. Open the spreadsheet and performthe required analysis to answer the question below.What would be SSC's estimated cost of equity if it changed itscapital structure to 50% debt and 50% equity? Round your answer totwo decimal places. Do not round intermediate steps.
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