Trendsetters has a cost of equity of 18.1 percent. The market risk premium is 10.2 percent and the risk-free rate is 4.4 percent. The company is acquiring a competitor, which will increase the company\'s beta to 1.6. What effect, if any, will the acquisition have on the firm\'s cost of equity capital?

Answer

		No effect
		Decrease of 2.62 percent
		Decrease of 0.84 percent
		Increase of 2.62 percent
		Increase of 4.13 percent