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 cost of equity is inversely related to the debt-equity ratio.

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

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

D. The firm's financial risk is unaffected by the debt-equity ratio.

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