Question 5 Mopani Ltd. buys, process and freeze dries, Mopani worms for consumption using a variety of industrial packaging techniques. The company has been successful, but when the company was young, it borrowed heavily at a high rate. It is now considering two capital structures. The two options the company needs to choose from is as follows: Refinance its debt at a lower cost Issue equity and retire its debt The management has decided that it will only do one or the other. Considering the above information, if the debt capital structure leads to a WACC of 13% while the equity structure leads to a WACC of 15% and the decision is made based purely on the basis of financial risk involved, which capital structure would you recommend the company take? Assume the company wishes to minimise its financial risk. Choose the most correct answer. A. Issue equity because debt is the source of financial risk B. Refinance its debt, a lower interest payment will lower the risk involved C. Neither, the financial risk will remain unchanged either way