A Firm Has Zero Debt in Its Capital Structure

Multiple Choice

A firm has zero debt in its capital structure. Its overall cost of capital is 10 percent. The firm is considering a new capital structure with 60 percent debt. The interest rate on the debt would be 8 percent. Assuming there are no taxes, its cost of equity capital with the new capital structure would be

A) 8 percent.
B) 16 percent.
C) 13 percent.
D) 10 percent.