Multiple Choice
Within reasonable parameters,if a firm increases its debt as a proportion of its capital structure:
A) its overall cost of capital increases because the amount of interest it has to pay increases.
B) WACC declines because of the tax advantage of debt.
C) WACC increases because the proportion of interest to dividends increases.
D) its costs increase because it is contractually required to pay interest,while dividends are paid in the firm's discretion.
Correct Answer:
Verified
Correct Answer:
Verified
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