Agrilife, Inc. changes its capital structure from 60% debt and 40% equity to 40% debt and 60% equity. Everything else stays the same. Its weighted average cost of capital will

Hint: We know that stocks (i.e., equity) are riskier securities than bonds (i.e., debt). Hence, investors usually require higher return from stocks than bonds. That means, cost of equity is usually higher than cost of debt.

increase

decrease

stay the same

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