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Suppose the beta of the firm's (operating) assets is equal to 0.5. The firm currently...

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Suppose the beta of the firm's (operating) assets is equal to 0.5. The firm currently has $2.5M in debt and $3.75M in equity. The firm is considering increasing its debt from $2.5M to $4M. If the firm goes ahead with the planned debt issuance, what do you expect the firm's cost of equity to be? You can assume that the market risk premium is 6% and the risk-free rate is 3%. A. The firm's cost of equity is 6.1% B. The firm's cost of equity is 10.7% C. The firm's cost of equity is 8.0% D. The firm's cost of equity is 8.8% E. The firm's cost of equity is 6.0% F. The firm's cost of equity is 10.2% G. The firm's cost of equity is 4.5% H. The firm's cost of equity is 5.5% 1. The firm's cost of equity is 9.2%

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