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Coco Inc.'s capital structure consists of 80% debt and 20% common equity, its beta is 1.8, before tax cost of debt is currently at 12%,
Coco Inc.'s capital structure consists of 80% debt and 20% common equity, its beta is 1.8, before tax cost of debt is currently at 12%, and its tax rate is 40%.However, the CFO thinks the company has too much debt, and she is considering moving to a capital structure with 40% debt and 60% equity with before tax cost of debt 6%.The risk-free rate is 5.0% and the market total return is 11%.By how much would the WACC change due to this shift in Coco's capital structure?
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