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Tutorial 15036

Which of the following statements about the cost of capital is CORRECT? a. A change in a company's target capital structure cannot affect its WACC. b....

Question:

Which of the following statements about the cost of capital is CORRECT? a. A change in a company\'s target capital structure cannot affect its WACC. b. WACC calculations should be based on the before-tax costs of all the individual capital components. c. If a company\'s tax rate increases, then, all else equal, its weighted average cost of capital will decrease. d. Flotation costs associated with issuing new common stock normally lead to a decrease in the WACC. e. An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.

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