Dyson IncCurrently Finances with 20

Multiple Choice

Dyson Inc.currently finances with 20.0% debt (i.e.,w_d = 20%) ,but its new CFO is considering changing the capital structure so w_d = 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 (w_c) = 1 − w_d.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%