A change in the company's capital structure will change the amount of taxes paid but will not change the WACC.

Question

Quizplus · Accepted Answer

A change in the capital structure, such as issuing debt or equity, can affect the cost of capital and therefore the WACC. This is because the cost of debt and equity financing is different, and the proportion of each in the capital structure changes the overall WACC. Additionally, a change in the capital structure can affect the amount of interest expenses and other tax-deductible expenses, which can ultimately impact the amount of taxes paid by the company.

A Change in the Company's Capital Structure Will Change the Amount