Dyson Inc. currently finances with 20.0% debt (i.e., wd = 20%), but its new CFO is considering changing the capital structure so wd = 36.0% by issuing additional bonds and using the proceeds to repurchase and retire 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? Do not round your intermediate calculations. (Hint: You must unlever the current beta and then use the unlevered beta to solve the problem.)

Risk-free rate, rRF	5.00%		Tax rate, T	40%
Market risk prem, RPM	6.00%		Current wd	20%
Current beta, bL1	1.65		Target wd	36.0%

a. 1.69%

b. 1.24%

c. 1.61%

d. 1.68%

e. 1.66%