How would each of the following affect a tirm"s cost of debt. kj( 1 — T); its cost of equity, k;

and its weighted average cost of capital. WACC? Indicate by a plus (+), a minus (— ). or a zero f the fact r would raise, lower, or have an indeterminate effect on the item in question. .Assume other things are held constant. Be prepared to justify your answer, but recognize that ral of the parts probably have no single correct answer: these questions are designed to stimulate thought and discussion.AppendixLO1

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a. The corporate tax rate is lowered. b. The Federal Reserve tightens credit. c. The firm uses more debt: that is, it increases its debt assets ratio. d. The dividend payout ratio is increased. e. The firm doubles the amount of capital it raises during the year. f. The firm expands into a risky new area. The firm merges with another firm whose earnings are countercyclical both to those of the first firm and to the stock market. h. The stock market falls drastically, and the firms tok falls along with the rest. . Investurs became more risk averse. Then is an electric utility with a large Investment in nuclear plants. Several states n nuclear power generation. p ka(1-T) EFFECT ON ks WACC