Verysis Corp. is financed entirely by common stock and has a beta of 1.25. The firm is expected to generate a level, perpetual stream of earnings, and dividends. The stock has a price earnings ratio of 6.90 and a cost of equity of 16%. The company's stock is selling for $34. Now the firm decides to repurchase half of its shares and substitute an equal value of debt. The debt is risk-free. with an interest rate of 4%. The company is exempt from corporate income taxes. Assume MM are correct. Calculate the cost of equity after the refinancing. Multiple Choice 20.82 16% 28% 20.5%