11. Compton Corporation currently has no debt in its capital structure. As an unlevered firm, its cost of equity is 10 percent. It is considering substituting $40,000 in debt at 4 percent interest. The EBIT for the firm is $15,000 under either scenario, and the tax rate is 35 percent. According to M&M with taxes, what is the debt/equity ratio for the levered firm?

Group of answer choices

a. .24

b. .32

c. .41

d. .56