Quantitative Problem: Currently, Meyers Manufacturing Enterprises (MME) has a capital structure consisting of 35% debt a

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Quantitative Problem: Currently, MeyersManufacturing Enterprises (MME) has a capital structure consistingof 35% debt and 65% equity. MME's debt currently has a 7.4% yieldto maturity. The risk-free rate (rRF) is 5.4%, and themarket risk premium (rM – rRF) is 6.4%.Using the CAPM, MME estimates that its cost of equity is currently10.7%. The company has a 40% tax rate.
a. What is MME's current WACC? Do not round intermediatecalculations. Round your answer to two decimal places. %
b. What is the current beta on MME's common stock? Do not roundintermediate calculations. Round your answer to four decimalplaces.
c. What would MME's beta be if the company had no debt in itscapital structure? (That is, what is MME's unlevered beta,bU?) Do not round intermediate calculations. Round youranswer to four decimal places.
MME's financial staff is considering changing its capitalstructure to 45% debt and 55% equity. If the company went aheadwith the proposed change, the yield to maturity on the company'sbonds would rise to 7.9%. The proposed change will have no effecton the company's tax rate.
d. What would be the company's new cost of equity if it adoptedthe proposed change in capital structure? Do not round intermediatecalculations. Round your answer to two decimal places. %
e. What would be the company's new WACC if it adopted theproposed change in capital structure? Do not round intermediatecalculations. Round your answer to two decimal places. %
f. Based on your answer to Part e, would you advise MME to adoptthe proposed change in capital structure?-Select-
a.The firm should proceed with the recapitalization.
b.The firm should not proceed with the recapitalization.