Firm X has a debt-to-equity ratio of 0.7 its cost of equity is 20%, and its cost of debt is 10%. If the corporate tax rate is 28% and Firm X becomes ungeared / unleveraged, ie no debt, calculate its...

Given:
Cost of Equity (Ke) = 20%
Cost of Debt (Kd) = 10%
Debt-Equity Ratio = 0.70
Corporate Tax Rate = 28%
Leverage Beta = 1 (Assumed)
The Formula for calculating the Unleveraged cost of Equity is:
Levered Beta / (1+ (1-Tax rate) x Debt-Equity Ratio)
= 1 / (1 + (1- 0.28) x 0.70)
= 1 / 1.504
= 0.66
Hence the Unleveraged cost of equity will be...