An all-equity company decides to recapitalize. The company has an unlevered beta of 1.1, the market risk premium is 6% and the risk-free rate is 5%. The company's tax rate is 25%.

1. If the company starts to borrow with a 25% debt ratio, what will be the levered beta using Hamadas equation?
2. What is the cost of equity before and after the recapitalization respectively?
3. Why is the cost of equity higher after the recapitalization?