An all-equity firm with a cost of capital of 10% is considering adding $2 million in debt at a cost of 5% to its capital structure. The firm has 75,000 shares outstanding at a price of $50 per share. The firms tax rate is 40%. Assuming the firm does the change to its capital structure, the firms new cost of equity will be closest to:

A.) 10.00%.

B.) 11.60%.

C.) 12.35%.

D.) 13.92%.