Dye Industries currently uses no debt, but its new CFO is considering changing the capital structure to 49.0% debt (wd) by issuing bonds and using the proceeds to repurchase and retire some common shares so the percentage of common equity in the capital structure (wc) = 1 wd. Given the data shown below, by how much would this recapitalization change the firm's cost of equity, i.e., what is rL - rU? Do not round your intermediate calculations.

Risk-free rate, rRF 6.00% Tax rate, T 40% Market risk prem, RPM 3.00% Current wd 0% Current beta, bU 1.30 Target wd 49.0%

		2.59%
		1.91%
		2.92%
		1.57%
		2.25%