A firm has 0 debts in its capital structure. Its overall cost of capital is 9%. The firm is considering a new capital structure with 40% debt. The interest rate on the debt would be 4%. Assuming that the corporate tax rate is 34%, what would be its cost of equity capital with the new capital structure?
a. 11.2%
b. 11.0%
c. 10.32%
d. 13.95%
Please provide the solution