Assume the following information for Microsoft Corporation:

Previous Close	250.20	Total Assets	364 B
Open	252.01	Revenue	168 B
52 Week Range	213.43-253.82	Interest-Bearing Debt	185 B
Volume	22,514,786	Net Income	73 B
Avg. Volume (10 days)	24,031,402	Book Value of Equity	167 B
Market Value of Equity	1,900 B	Income tax rate	21%
Market Equity Beta	1.3	Average pretax borrowing rate	3.8%
PE Ratio (TTM)	27.48	EPS	9.65

If Microsoft were to double its debt, holding all else constant, what would its new cost of equity capital be? Assume a 6 percent market risk premium and 3 percent risk free rate.

a. 10.24 percent.

b. 3.80 percent.

c. 11.36 percent.

d. 9.67 percent.

e. None of the above.