Suppose That Taggart Transcontinental Currently Has No Debt and Has

Multiple Choice

Suppose that Taggart Transcontinental currently has no debt and has an equity cost of capital of 10%.Taggart is considering borrowing funds at a cost of 6% and using these funds to repurchase existing shares of stock.Assume perfect capital markets.If Taggart borrows until they achieved a debt-to-value ratio of 20%,then Taggart's levered cost of equity would be closest to:

A) 8.0%.
B) 9.2%.
C) 10.0%.
D) 11.0%.