NARRBEGIN: Bavarian Brew Bavarian Brew

NARRBEGIN: Bavarian Brew
Bavarian Brew
Bavarian Brew,an unlevered firm,has an expected EBIT of $500,000.The required return on assets for the firm's assets is 10%.The company has 250,000 shares outstanding.The company is considering raising $1 million in debt with a required return of 6% and would use the proceeds to repurchase outstanding stock.
-What is the Bavarian Brew's required return on levered equity after the restructuring?

A) 10.25%
B) 10.92%
C) 6.00%
D) 12.75%