Thomas Otto is an associate in the strategic consulting group for a medium-sized manufacturing company. Historically, the firm has financed projects using internal equity funds. The company is approaching the retained earnings break-even point, and the group’s Executive Vice President asks Otto to determine the change in the weighted average cost of capital (WACC) if the firm uses external equity funds instead of internal funds. An analyst in the group provides the following information:

And, the firm’s investment bank provides the following projections for a new common stock issue:
Which of the following choices best completes the following sentence? Using this information, Otto reports that the WACC will:

Choose the correct option from the given list.

increase by 1.82%.

increase by 1.66%.

decrease by 1.66%.

remain the same.

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