Using the Modigliani-Miller (MM) theory in a perfect market, you want to evaluate whether to invest in a project and how to finance the project. The project has free cash flows in one year of $900 in a weak economy or $1400 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $800, and the project's cost of capital is 15%. The risk-free interest rate is 5%. Suppose that to raise the funds for the initial investment, you can both raise some amount of levered equity and borrow $500 at the risk-free rate. For the cost of the levered equity and the cost of capital (WACC), which of the following statements is correct?