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33 XX Co is a geared company whose equity has a market value of $1,350 million and debt has WID a market value of $420 million. XX Co plans to issue $200 million of new shares, and to use the funds raised to pay off some of the debt. Repay Debt JXX Co currently has a cost of equity of 13.5%, and YY Co (an equivalent ungeared company Using Equity operating in the same business sector as XX Co) has a cost of equity of 12.8%. XX Co's WACC is currently 11.9% and the tax rate is 30%. According to Modigliani and Miller's theory with tax, XX Co's WACC will move to: Discuss A 12.3% =12.8%x 1- 0.30x220 1,710 B 13.0% =13.5%x 1- 0.30x220 1,770 C 12.3%=12.8%x 1- 0.30x220 1,770 D 13.0% =13.5%x 1- 0.30x220 1,710