Suppose That Rearden Metal Currently Has No Debt and Has

Multiple Choice

Suppose that Rearden Metal currently has no debt and has an equity cost of capital of 12%.Rearden is considering borrowing funds at a cost of 6% and using these funds to repurchase existing shares of stock.Assume perfect capital markets.If Rearden borrows until they achieved a debt-to-equity ratio of 50%,then Rearden's levered cost of equity would be closest to:

A) 10.0%.
B) 12.0%.
C) 15.0%.
D) 16.0%.