Please show all steps to solve. Preferably, use Excel. Thanks.

HMC Inc. is trying to establish its optimal capital structure. Its current capital structure consists of 25% debt and 75% equity; however, the CEO believes the rm should use more debt. The risk-free rate, I'RF, is 3.5%, the market risk premium, RPM, is 5.5%, and the rm's tax rate is 35%. Currently, the rm's cost of equity is 8.5%, which is determined by the CAPM. What would be the rm's estimated cost of equity if it changed its capital structure to 45% debt and 55% equity? a. 9.80% b. 10.20% c. 1 1.45% d. 12.50% e. 13.33%