A company's weighted average cost of capital will increase with the proportion of debt included in its capital structure.

Name: A company's weighted average cost of capital will increase with the proportion of debt included in its capital structure.
Brand: Quizplus
Rating: 5.0 (22 reviews)

Question

Quizplus · Accepted Answer

Increasing the proportion of debt in a company's capital structure can actually decrease the weighted average cost of capital (WACC) because debt financing is typically less expensive than equity financing, due to tax deductibility of interest payments.

A Company's Weighted Average Cost of Capital Will Increase with the Proportion