Vafeas Inc.'s capital structure consists of 80% debt and 20% common equity, its beta is 1.60, and its tax rate is 40%. However, the CFO thinks the company has too much debt, and he is considering moving to a capital structure with 40% debt and 60% equity. The risk-free rate is 3% and the market risk premium is 8%. By how much would the capital structure shift change the firm's cost of equity? (Just calculate the change in the cost of equity).

• A. -6.36%
• B. -7.54%
• C. -5.36%
• D. -6.99%
• E. -5.20%