Horton Anonymous has a debt-to-equity ratio of one and pays a flat tax of 15% on taxable income. Which one of the following statements is correct in relation to M&M Proposition II?

a) The firm's financial risk is unaffected by the debt-to-equity ratio.

b) The firm's required return on assets is equal to the weighted average cost of capital.

c) The firm's cost of equity is inversely related to the debt-to-equity ratio.

d) The firm's cost cost of equity remains constant as the debt-equity ratio increases.

e) The firm's required return on assets is greater than the weighted average cost of capital.