Your CFO tells you to analyze the capital structure of the company. You do so, using all available data, and find that the "target" ratio of debt to equity in the company is 22%/78%. Given the current Beta value for the company, you do an detailed analysis and find that the company's WACC could be lowered, if you move to a 30%/70% capital structure. The reason this makes sense to you to do so, if you can convince your CFO, is:

Select one:

a. by so doing, you can lower the Beta coefficient, reduce the debt costs, reduce the required rate of return on equity, and decrease the WACC so that stockholder wealth can be maximized.

b. by so doing, the additional debt costs will increase interest expense, lower net income, but increase the ROE since there will be relatively less stockholders. This would maximize stockholder wealth.

c. by so doing, you will maximize stockholder wealth by now being able to restrict additional investments, and using those monies to pay off the additional debt faster

d. by so doing, you will lower the cost of capital, but at the same time the number of projects that the company could invest in will be less, since the NPV valuation technique will start yielding negative NPVs for projects that used to have a positive NPV at the original target structure.

e. by so doing, you will lower the cost of capital, but at the same time the number of projects that the company could invest in will be more, since the NPV valuation technique will start yielding positive NPVs for projects that used to have a negative NPV at the original target structure.