Aurillo Equipment Company (AEC) projected next year's ROE to be 6%. However, the firm can increase its ROE by refinancing some high interest bonds currently outstanding. The firm's total debt will remain at $200,000 and the debt ratio will hold constant at 80%, but the interest rate on the refinanced debt will be 10%. The rate on the old debt is 14%. Refinancing will not affect sales, which are projected to be $300,000. The basic earning power will be 11% and the firm's tax rate is 40%. If AEC refinances, what will be its projected new ROE?

a. 8.2%

b. 18.7%

c. 3.0%

d. 9.0%

e. 10.0%