Assume a firm has a debt-equity ratio of .36. The firms cost of equity:

• increases as the unsystematic risk of the company's stock increases.

• equals the company's pretax weighted average cost of capital.

• is affected by both a change in the firms beta and the firms projected rate of growth.

• tends to remain static even as the company's level of risk increases.

• equals the risk-free rate plus the market risk premium.