Under the assumption of Modigliani and Millers original paper, a firm stock price will be maximized at 100% debt, signaling theory implies that a firm with extremely favorable prospects will be more likely to issue stock to fund any new projects. when a firm announces a new stock offer, the price of its stock will decrease when information is asymmetric, managers have more information about a firms prospectus than investors do. general Forge Foundry Corporation currently has no debt in its capital structure, but it is considering using some debt and reducing its outstanding equity. The firm's unlevered beta is 1. 05, and its cost of is 12. 40%. Because the firm has no debt in its capital structure its weighted average cost of capital (WACC)also equals 12. 40%, Because the firm has no debt in its capital structure, its weighted average cost of capital 40% General Forge is examining how different levels of debt will affects its costs of debt and equity as well as its WACC. The Firm has collected the financial information that follows to analyze its weighted average cost of capital (WACC) the following table