Which of the following statements about the cost of capital is INCORRECT? A comp

ID: 2757496 • Letter: W

Question

Which of the following statements about the cost of capital is INCORRECT?

A company's target capital structure affects its weighted average cost of capital.

Weighted average cost of capital calculations should be based on the after-tax-costs of all the individual capital components.

If a company's tax rate increases, then, all else equal, its weighted average cost of capital will increase.

Flotation costs can increase the cost of preferred stock.

A company's target capital structure affects its weighted average cost of capital.

Weighted average cost of capital calculations should be based on the after-tax-costs of all the individual capital components.

If a company's tax rate increases, then, all else equal, its weighted average cost of capital will increase.

Flotation costs can increase the cost of preferred stock.

If a company's tax rate increases, then, all else equal, its weighted average cost of capital will increase.

since if tax rate increase then Cost of debt will fall which means that WACC will decrease.

If a company's tax rate increases, then, all else equal, its weighted average cost of capital will increase.

since if tax rate increase then Cost of debt will fall which means that WACC will decrease.

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.