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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 30%. However, the CFO thinks the company has too much debt, and she is considering moving to a capital structure with 10% debt and 90% equity with before tax cost of debt 2%. The risk-free rate is 3.0% and the market total return is 10%. By how much would the WACC change due to this shift in Cocos capital structure? (6 points)
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