US Robotics Inc. has a current capital structure of $30\%$ debt and $70\%$ equity. Its current before$-$tax cost of debt is $8\%,$ and its tax rate

is $25\%.$ It currently has a levered beta of $1\mathrm{.}25.$ The risk$-$free rate is $3\%,$ and the risk premium on the market is $7\mathrm{.}5\%.$ US Robotics Inc.

is considering changing its capital structure to $60\%$ debt and $40\%$ equity. Increasing the firm's level of debt will cause its before$-$tax cost

of debt to increase to $10\%.$

First, solve for US Robotics Inc.$\text{'}$s unlevered beta. $0\mathrm{.}95gra{d}_{?}$

Use US Robotics Inc.$\text{'}$s unlevered beta to solve for the firm's levered beta with the new capital structure.

Use US Robotics Inc.$\text{'}$s levered beta under the new capital structure, to solve for its cost of equity under the new capital structure.

What will the firm's weighted average cost of capital $($WACC$)$ be if it makes this change in its capital structure?

$10\mathrm{.}03\%$

$11\mathrm{.}80\%$

$7\mathrm{.}67\%$

$8\mathrm{.}85\%$