Underwood Industries currently has no debt and its cost of equity is 14.4%. The firm plans to issue $84M of perpetual debt at 4.8% interest rate and repurchase an equal value of equity shares. The tax rate is 36%. Find the new cost of equity if there are currently 8M shares outstanding with a total market value of $120M.

28.22%

27.40%

24.95%

22.19%

26.90%