Taylor Machinery is considering a change to the company's capital structure, which currently consists of 23% debt and the remainder equity. The CFO believes the firm should use more debt, but the CEO is reluctant to increase the debt ratio. The risk-free rate is 4%, the market risk premium is 5%, and the firm's tax rate is 30%. Currently, the company's cost of equity is 11%, as determined by the CAPM. What would be the estimated cost of equity (in percentage terms, rounded to two decimal places, e.g., 12.34) if the firm used 41% debt instead? Note: You must first calculate the company's current beta and then the unlevered beta, before determining the new levered beta used to recalculate the cost of equity.
In Excel if possible