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The JenniLu Co. has a return on assets of 14%. The company is currently an all-equity firm. JenniLu is considering converting some of its equity

The JenniLu Co. has a return on assets of 14%. The company is currently an all-equity firm. JenniLu is considering converting some of its equity to debt. The cost of debt is 9%. There are no corporate taxes. What will the cost of equity be if the firm switches to using debt with a debt- equity ratio of 0.62 ?

A. 23.0%

B. 9.62%

C. 18.6%

D. 14.0%

E. 17.1%

please explain as well.

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