Laramie Trucking's CEO is considering a change to the company's capital structure, which currently consists of $25\%$ debt and $75\%$ equity. The CFO believes

the firm should use more debt, but the CEO is reluctant to increase the debt ratio. The risk$-$free rate, $r_{RF},$ is $5\mathrm{.}0\%,$ the market risk premium, $RP{P}_M,$ is $6\mathrm{.}0\%,$

and the firm's tax rate is $25\%.$ Currently, the cost of equity, $r_s,$ is $11\mathrm{.}5\%$ as determined by the CAPM. What would be the estimated cost of equity if the firm

used $60\%$ debt? $($Hint: You must first find the current beta and then the unlevered beta to solve the problem.$)$

a$.13\mathrm{.}58\%$

b$.12\mathrm{.}50\%$

c$.14\mathrm{.}77\%$

d$.11\mathrm{.}50\%$

e$.16\mathrm{.}05\%$