Assume the M&M assumptions hold $($no taxes, no default, etc.$).$ Firm U has a debt$-$equity ratio of zero.

The return on firm U$$s assets equals $10\%$ and the cost of debt is equal to $5\%.$ An otherwise identical firm M has a debt$-$equity ratio of D$/$E $=4.$ What is firm M$$s cost of capital? $($The answer is $10\%)$

$($a$)5\%$

$($b$)10\%$

$($c$)15\%$

$($d$)20\%$

$($e$)$ none of the above