Faraday Enterprises is a publicly traded company. It currently has 10 million shares trading at $12/share and $150 million in book value of equity. The firm also has market value of debt of $ 75 million. The cost of equity for the company is 9%, the pre-tax cost of debt is 4% and the marginal tax rate is 40%. What will happen if the firm manager uses the book value of equity and market value of debt to estimate the discount factor? The manager will overstate the cost of debt The manager will understate the cost of debt The firm will overstate the cost of capital The manager will understate the cost of capital The manager will overstate the cost of equity