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All Else Constant, the Weighted Average Cost of Capital for a Risky

Question 33

Multiple Choice

All else constant, the weighted average cost of capital for a risky, levered firm will decrease if:


A) the firm's bonds start selling at a premium rather than at a discount.
B) the market risk premium increases.
C) the firm replaces some of its debt with preferred stock.
D) corporate taxes are eliminated.
E) the dividend yield on the common stock increases.

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