Cartwright communications is considering making a change to its capital structure to reduce its cost of capital and increase firm value. right now, cartwright 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, rm − rrf, 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 cartwright's estimated cost of equity if it were to change its capital structure to 50% debt and 50% equity?
a. 13.00%
b. 13.64%
c. 14.35%
d. 14.72%
e. 15.60%