Assume that a firm is 100 percent equity financed and that the cost of equity is 15%. This firm then decides to finance 20 percent of its assets with debt. Assume, also, that the cost of equity does not change as a result of taking on debt financing and the firm is easily able to repay the debt. As a result of using debt financing, this firm's WACC will likely: increase because the firm got riskier due to the debt obligation remain unchanged. decrease. It is not possible to say unless the YTM on debt is given. All else equal, an increase in the cost of capital will a project's NPV. while a decrease in risk will a project's NPV. (Assume normal/conventional cash flows; i.e., outflows precede inflows.) increase, increase increase, decrease decrease, increase decrease, decrease