Your firm has debt worth $200,000, with a yield of 10 percent, and equity worth $400,000. It

Question:

Your firm has debt worth $200,000, with a yield of 10 percent, and equity worth $400,000. It is growing at a seven percent rate, and faces a 40 percent tax rate. A similar firm with no debt has a cost equity of 15 percent. Under the MM extension with growth, what is its cost of equity?
(a) 15.0%
(b) 12.0%
(c) 18.0%
(d) 17.5%
(e) 18.4%