Company B is financed entirely with Equity. The stock of Company B is publicly traded and has a Beta = 1.0. The company is expected to generate a level, perpetual stream of earnings and dividends. The Stock has a P/E Ratio of 8.0. It also has a cost of Equity Capital (also call Market Capitalization Rate) = 12.5%. The share price is $50.00/share and there are 10,000,000 shares outstanding. The Risk Free Rate is 5%.

The company decides to repurchase half of its shares and uses risk free debt to finance the repurchase.

What is the new company Cost of Equity?