During the year 2011, DEF Company's capital structure consisted solely of common stock. It was determined that the cost of maintaining that capital was 6%. In 2012, DEF decided to issue bonds. The company's new capital structure is 2/3 common stock and 1/3 bonds. The cost of capital for the common stock remains unchanged and the cost of maintaining the bonds is 8%.

Select one:

a.The weighted average cost of capital (WACC) for the company increased from year 2011 to year 2012

b.The weighted average cost of capital (WACC) for the company decreased from year 2011 to year 2012

c.The weighted average cost of capital (WACC) for the company remained the same from year 2011 to year 2012

Explain why.