Which of the following statements 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) Flotation costs associated with issuing new common stock normally reduce the WACC.
D) If a company's tax rate increases,then,all else equal,its weighted average cost of capital will decline.
E) An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.

Question

Quizplus · Accepted Answer

Statement d is true,because the cost of debt for WACC purposes = r_d(1 ? T),so if T increases,then r_d(1 ? T)declines.

Which of the Following Statements Is CORRECT