A levered firm has only 2 assets on its balance sheet with the below-market values and CAPM betas. The risk free rate is 3% pa and the market risk premium is 5% pa. Assume that the CAPM is correct and all assets are fairly priced.

Selected Company Details
Item	Market value ($m)	Beta
Cash asset	0.5	0
Truck asset	0.5	2
Loan liabilities	0.25	0.1
Equity funding	?	?

The firm then raises $1m more cash in a fairly priced seasoned equity offering (SEO) where the subscription price and pre-announcement share price were both $10 per share. Assume that the beta and yield on the existing loan liabilities are unchanged compared to before. All figures are given to 6 decimal places. Which of the following statements is NOT correct? This event led to a:

Select one:

a.

$1m increase in equity to $1.75m and cash to $1.5m.

b.

Increase in the total number of shares to 0.175m.

c.

Decrease in the asset beta to 0.5.

d.

Decrease in the equity beta to 0.271429.

e.

Decrease in the debt-to-assets ratio to 12.5%.