ABC Corp. Debt Financing and Firm Value Impact

ABC Corp. recently announced that it will issue $100 million in debt to finance a new project. Currently, the company's capital structure consists of 60% equity and 40% debt. According to the Modigliani-Miller Proposition II, if the firm’s cost of equity increases with leverage, which of the following statements is true regarding the impact of this decision on the value of the firm and the weighted average cost of capital (WACC)?