Macbeth Spot Removers is entirely equity financed. Use the following information.

Number of shares: 2,200

Price per share: $34

Market value of shares: $74,800

Expected operating income: $11,220

Return on assets: 15%

Mackbeth now decides to issue $37,400 of debt and to use the proceeds to repurchase stock. Suppose that Ms. Mackbeth's investment bankers have informed her that since the new issue of debt is risky, debtholders will demand a return of 11.3%, which is a 2.7% above the risk-free interest rate. Assume corporate tax rate is zero.

A. What is the company's overall cost of capital after the debt issue?

B. What is the cost of equity after the debt issue?

C. Suppose that the beta of the unlettered stock was 0.60. What will BA, BE, AND BD be after the change to the capital structure?