Increasing financial leverage increases both the cost of debt (rdebt) and the cost of equity (requity). So the overall cost of capital cannot stay constant. This problem is designed to show that the speaker is confused. Buggins Inc. is financed equally by debt and equity, each with a market value of $1 million. The cost of debt is 7%, and the cost of equity is 12%. The company now makes a further issue of debt and uses the proceeds to repurchase equity. This causes the cost of debt to rise to 8% and the cost of equity to rise to 14%. Assume the firm pays no taxes. a. After the debt issue, what percent of the firm is financed with debt? (Do not round intermediate calculations. Enter your answer as a whole percent.) b. After the debt issue, what percent of the firm is financed with equity? (Do not round intermediate calculations. Enter your answer as a whole percent.) c. What is the overall cost of capital? (Enter your answer as a percent rounded to 1 decimal place.)

*this is all the information provided to me, I thought I needed the amount of debt to be raised to solve it, and it is not provided in the problem. I posted it to see if anyone had a different way of solving it. Thanks!*