Weighted average cost of capital American Exploration, Inc, a natural gas producer, is trying to decide whether to revise its target capital structure. Currently it targets a 5050 mix of debt and equity, but it is considering a target capital structure with 90% debt. American Exploration currently has 6% after-tax cost of debt and a 12% cost of common stock. The compary does not have any preferred stock outstanding a. What is American Exploration's current WACC? b. Assuming that its cost of dobt and equity remain unchanged, what will be American Exploration's WACC under the revised target capital structure? c. Do you think shareholders are affected by the increase in debt to 90% ? If so, how aro they affected? Are the common stock claims riskier now? d. Suppose that in response to the increase in debt. American Exploration's sharehoiders increase their required return so that cost of common equity is 16%. What will its now WACC be in this case? e. What does your answer in part d suggest about the tradeoll between financing with debt versus equity? a. American Exploration's cument WACC under the 5050mix of debt and equity is \%. (Round to two decimal places.)