Question 7 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. Suppose that the WACC under the debt refinancing option would be 13% and if the company were to Issue equity to retire its debt that it's WACC would be 15% Further to this, assume that the ROE would be higher under the debt refinancing option while the company's beta would also be higher under this option. The net profit of the company is however higher under the equity issue option. Which of the two options would you choose? A. Debt refinancing B. Equity issue