Paranoid Corp. has no debt and the market value of its equity is $10 million. Its cost of equity is currently 12%. The firm plans to issue $5 million of perpetual debt at 4% interest rate. The proceeds will be used to repurchase an equal value of equity shares. The tax rate is 0. What will be the new cost of equity?

		15.4%
		20.0%
		16.7%
		18.0%
		16.0%