7. As the CFO of Monash Inc., you decrease the proportion of capital financed through debt. Which of the following impacts upon the cost of equity is the most correct?

Select one:

a. Ke will decrease due to lower risk of residual claim.

b. Ke will decrease due to higher risk of residual claim.

c. None of the above.

d. Ke will increase due to higher risk of residual claim.

e. Ke will increase due to lower risk of residual claim.