Suppose Two Firms Are Exactly the Same Except Firm a Has

Multiple Choice

Suppose two firms are exactly the same except Firm A has no debt in its capital structure and Firm B has 50% debt in its capital structure. Firm A has a WACC of 15%. If Firm B's cost of debt is 10% (after-tax value) , what must Firm B's cost of equity be to have the same WACC as Firm A?

A) 15%
B) 20%
C) 12.5%
D) 25%