For a profitable firm, an increase in its marginal tax rate will increase its weighted average cost of capital.

Name: For a profitable firm, an increase in its marginal tax rate will increase its weighted average cost of capital.
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An increase in the marginal tax rate decreases the cost of debt because interest payments are tax-deductible, which can lower the weighted average cost of capital (WACC) since the after-tax cost of debt is a component of WACC.

For a Profitable Firm, an Increase in Its Marginal Tax