You work in a newly-established company that plans to manufacture and sell an innovative product in the market. The issue now is how to finance the company, with only equity or with a 6:4 mix of debt and equity. Expected operating income is 400,000, required investment is 2,500,000, tax rate is 35%, and interest rate is 10%. How much higher will the firm's expected return on equity be if it uses some debt rather than all equity?

A. 6.77%

B. 6.14%

C. 5.85%

D. 6.45%