Dye Industries currently uses no debt, but its new CFO is considering changing the capital structure to 40.0% debt by issuing bonds and using the proceeds to repurchase and retire some common stock at book value. Given the data shown below, by how much would this recapitalization change the firm's cost of equity, i.e., what is rL - rU?
Risk-free rate, rRF_____________6.00%
Tax rate, T___________________40%
Market risk premium, RPM______4.00%
Current debt ratio_____________0%
Current beta, bU______________1.15
Target debt ratio______________40%