Walmart is considering changing the current capital structure to 40% debt and 60% equity, how would this impact the company's cost of capital?  Would you recommend this change? Why or why not?

Beta = 0.53

Risk Free Rate = 1.95%

Average Market Rate of Return = 8%

Equity Risk Premium = 6.05%

 

Market Value of Debt =  $48, 644, 000, 000

Cost of Debt = 4.06%

Weight of Debt = 10.91

 
Market Value of Equity = $397, 054, 230, 220

Weight of Equity = 89.09%

Cost of Equity = 5.16%

 
Market Value of Company = $445, 698, 230, 220

Effective Tax Rate = 24.48%

WACC = 4.93%