Dye Industries currently uses no debt, but its new CFO is considering changing the capital structure to 53.0% debt (w_d) by issuing bonds and using the proceeds to repurchase and retire some common shares so the percentage of common equity in the capital structure w_c = 1 w_d declines. Given the data shown below, by how much would this recapitalization change the firm's cost of equity, i.e., what is r_L - r_U? Do not round your intermediate calculations.

Risk-free rate, rRF	6.00%		Tax rate, T	25%
Market risk prem., RPM	3.50%		Current wd	0%
Current beta, bU	1.25		Target wd	53.00%

a. 2.91 p.p.

b. 1.23 p.p.

c. 6.34 p.p.

d. 4.93 p.p.

e. 3.70 p.p.