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Which leads to an increase in the aftertax cost of debt

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Reference no: EM133010429

Problem 1: Which of the following statements is NOT true regarding the weighted average cost of capital (WACC)?

Group of answer choices

Option 1: The cost of equity is tax deductible.

Option 2: The cost of debt is tax deductible.

Option 3: Market values should be used to calculate weights, where possible.

Option 4: A higher WACC indicates higher financing costs.

Problem 2: Which of the following leads to an increase in the aftertax cost of debt?

Group of answer choices

Option 1: The company's tax rate declines.

Option 2: Market interest rates decline.

Option 3: the debt-equity ratio of the company declines.

Option 4: The company's beta increases.

Option 5: The company's bond rating improves.

Reference no: EM133010429

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