1. Suppose a firm initially has no debt financing (e.g. unlevered firm) and its cost of capital is 10%. Now the firm plans to take some debt and the debt will be 60% of the capital structure. The yield of the debt is 8% and there are no taxes. What will be the cost of equity under the current capital structure?

   	A.	8 percent
   	B.	16 per cent
   	C.	13 per cent
   	D.	10 per cent