Suppose an all-equity firm with a tax rate of 40% restructures itself by selling bonds and using the proceeds to buy back stock until it has an Equity Multiplier of 1.0. Which of the following best describes the likely effect of such a financing policy?

The Cost of Equity will fall and the WACC will fall

The Cost of Equity will Fall and the WACC will rise

The Cost of Equity will rise and the WACC will fall

Nothing will change