Which of the following statements is CORRECT? (Points : 0.83) A change in a comp

Question

Which of the following statements is CORRECT? (Points : 0.83) A change in a company’s target capital structure cannot affect its WACC. WACC calculations should be based on the before-tax costs of all the individual capital components. Flotation costs associated with issuing new common stock normally reduce the WACC. If a company’s tax rate increases, then, all else equal, its weighted average cost of capital will decline. An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.

Explanation / Answer

If a company’s tax rate increases, then, all else equal, its weighted average cost of capital will decline

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