2. The weighted average cost of capital The importance of knowing a firm's cost of capital Warm Duck Breswing Company has two divisions: ore is very risky, and the other exhibits significantylssrfisk. The company uses its investors' overall required rate of return to evaluate its investment projedts. It is most Ikely that the firm will become O Less risky over time, and its value will increase O Less risky over time, and its value will decrease O Riskier over time, and its value willincrease O Riskier over time, and its value will decrease Which of the following statements is correct? O A firm's after-tax cost of preferred stock may be significantly less than its before-tax cost, because issuing preferred stock dividends reates a tax shelter. O When all otter factors are held constant, a higher tax rate will lower a firm's weighted average cost of ca only if the firm uses debt financing The cost of raising funds from retained earnings is usually a lot cheaper than the cost of debt fi because the firm already pos the funds in retained earnings