Dyson Inc Currently Finances with 20

Multiple Choice

Dyson Inc. currently finances with 20.0% debt (i.e., wd = 20%) , but its new CFO is considering changing the capital structure so wd = 60.0% by issuing additional bonds and using the proceeds to repurchase and retire common shares so the percentage of common equity in the capital structure (wc) = 1 - wd. Given the data shown below, by how much would this recapitalization change the firm's cost of equity? (Hint: You must unlever the current beta and then use the unlevered beta to solve the problem.)

A) 4.05%
B) 4.50%
C) 4.95%
D) 5.45%
E) 5.99%