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Company X’s current capital structure consists of 60% debt and 40% common equity. Its current beta...

Company X’s current capital structure consists of 60% debt and 40% common equity. Its current beta is 1.74. The risk-free interest rate is 3%, market risk premium is 5%, and the company’s tax rate is 30%. Using the CAPM, what is the company’s required rate of return if its capital structure changes to 50% debt and 50% common equity? (A) 7.24% (B) 10.21% (C) 11.70% (D) 13.01% (E) 17.79%

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