Sumner Inc.'s capital structure consists of 80% debt and 20% common equity, its beta is...
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Sumner Inc.'s capital structure consists of 80% debt and 20% common equity, its beta is 1.9 before tax, cost of debt is currently at 12%, and its tax rate is 40%. The CFO thinks the company has too much debt, and she is considering moving to a capital structure with 30% debt and 70% equity with a before-tax cost of debt of 6%. The risk-free rate is 5.0% and the market total return is 11%. By how much would the WACC change due to this shift in Sumners capital structure?
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