TTC currently has common stock with a market value of $$8$ billion, along with their debt of $$3\mathrm{.}2$ billion. Investors are anticipating a $15\%$ return on stock, and a $5\%$ return on debt. If TTC were to issue $$3\mathrm{.}2$ billion of new stock in order to pay off the debt, what would be the anticipated return of the stock after this transaction? What would happen to the return on stock if the company were instead to take out $$1$ billion in debt to repurchase shares? Assume both transaction would occur in a perfect market.

Anticipated stock return after stock issuance to pay off debt: Ru $=[$E$/($E$+$D$)]*$Re $+[$D$/($E$+$D$)*$Rd Page $504$

Anticipated return after increase of debt to repurchase shares: Re $=$ Ru $+[($D$/$E$)*($Ru$-$Rd$)]$ Page $504$

For the scenarios above, TTC wants to evaluate their WACC on a pretax and after tax basis. The company has a tax rate of $35\%.$ What will be the WACC for each situation outlined in the previous scenario?

After stock issuance to pay off debt

Pre$-$Tax WACC Rwacc $=[$E$/($E$+$D$)]*$Re $+[$D$/($E$+$D$)*$Rd pg $532$

After Tax WACC Rwacc $=[$E$/($E$+$D$)]*$Re $+[$D$/($E$+$D$)*$Rd$*(1-$tax rate$)$ pg $532$

After increase of debt to repurchase shares

Pre$-$Tax WACC Rwacc $=[$E$/($E$+$D$)]*$Re $+[$D$/($E$+$D$)*$Rd pg $532$

After Tax WACC Rwacc $=[$E$/($E$+$D$)]*$Re $+[$D$/($E$+$D$)*$Rd$*(1-$tax rate$)$ pg $532$

Based on your calculations and understanding, what changes should Techie Technology Company make to its capital structure?

Explain your reasoning using a minimum of $3$ sentences.