1. If a company issues shares, and uses the proceeds to repay a loan, which of the following statements is NOT correct?

a.

the after tax weighted average cost of capital (WACC) will increase due to the lower interest tax shield from having more debt.

b.

the company will pay more tax to the government due to lower tax shields.

c.

Due to the increased leverage, both gains and losses made by the company will be further magnified.

d.

the companys expected levered firm free cash flow (FFCF or CFFA) will be lower due to the increased tax payment.

e.

The before tax WACC will be unchanged as assets (and required return on assets) will be unchanged.