The cost of debt, rd, is always less than rs, so rd(1 − T) will certainly be less than rs.Therefore, since a firm cannot be 100% debt financed, the weighted average cost of capital will always be greater than rd(1 − T).

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This statement is true. The cost of debt is generally lower than the cost of equity, so rd(1 − T) will always be lower than rs. However, since most firms use a combination of debt and equity for financing, the weighted average cost of capital (which takes into account both rd and rs) will always be greater than rd(1 − T).

The Cost of Debt, Rd, Is Always Less Than Rs