Navare Ltd required return on its common stock is 8%. The market return is 7%, the T-bill is returning 2%, the companys Beta is 1.2 and its marginal tax rate is 25%. Navares is financed with 40% Debt and 60 % Equity.

Use the Hamada equation to find the companys required return if management changes its financing to 30% debt and 70% equity

r=RF+(MKTRF)

8= 2+ (7-2)1.2

A. 8.26%

B. 7.29%

C. 11.9%

D. 1.7%