ACME Company has Total Assets =$300 M. ACME currently has no debt, but is considering a recapitalization plan that will call for issuing debt at 10% and using the proceeds to buy back common stock shares in the open market. Operating income, total assets, and tax rate will not change. Which of the following will occur as a result of the reapitalization?

A) ACME's Return on Equity (ROE) will increase and Return on Assets (ROA) will decrease.

B) ACME's stock price will increase and operating leverage decrease.

C) Neither ROE nor ROA will change subce Operating Income, total assets, and tax rate are the same.

D) Since debt financing raises financial risk, increasing the debt ratio will always increase WACC.