4. A friend of yours is taking a Corporate Finance course at the University of Minnesota. Their class has just learned about the pre-tax weighted cost of capital (rwACC) and how to measure it. Your friend wonders why we cannot use the equity cost of capital ("TE") as an estimate for the pre-tax rwACC, and says to you: "Since we know that pre-tax rw ACC is equal to the unlevered cost of capital, ru, and unlevered cost of capital means there is no debt and it's all equity, so re should always be equal to the pre-tax rwACC." Please explain why your friend's understanding is incorrect. [5 points]