Serendipity Inc. is re$-$evaluating its debt level. Its current capital structure consists of $80\%$ debt and $20\%$ common equity, its beta is $1\mathrm{.}60,$ and its tax rate is $25\%.$ However, the CFO thinks the company has too much debt, and he is considering moving to a capital structure with $40\%$ debt and $60\%$ equity. The risk$-$free rate is $5\mathrm{.}0\%$ and the market risk premium is $6\mathrm{.}0\%.$ By how much would the capital structure shift change the firm's cost of equity?

Group of answer choices

$5\mathrm{.}40\%$

$6\mathrm{.}00\%$

$6\mathrm{.}60\%$

$7\mathrm{.}26\%$

$7\mathrm{.}99\%$