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A firm has recently adjusted its capital structure from 30% debt ratio to 50% debt ratio. Assume there are no other changes in the market

A firm has recently adjusted its capital structure from 30% debt ratio to 50% debt ratio. Assume there are no other changes in the market and all the assumptions of MM (with tax) hold. What will happen to the values of the following items?

Present value tax shields

 Answer 1Choose...IncreaseUnchangedDecrease

WACC before tax

 Answer 2Choose...IncreaseUnchangedDecrease

Firm value

 Answer 3Choose...IncreaseUnchangedDecrease

WACC after tax

 Answer 4Choose...IncreaseUnchangedDecrease

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