WACC Calculation Problem Evans Technology has the following capital structure: Debt Common Equity 40% 60% The after-tax cost of debt is 6%, and the cost of common equity is 13%. 1. What is the firm's current weighted average cost of capital? 2. An outside consultant has suggested that because debt is cheaper than equity, the firm should switch to a capital structure that is 50% debt and 50% equity. Under this new and more debt- oriented arrangement, the after-tax cost of debt is 7%, and the cost of common equity is 15%. Recalculate the firm's WACC. 3. Which plan is optimal in terms of minimizing the WACC? Is the outside consultant correct? Explain