Assume the current corporate income tax rate is 35%. If the rate were decreased to 15%, how would this impact the after-tax cost of debt? All else equal, would firms be more or less likely to issue debt as opposed to equity?

After-tax cost of debt increases; firms are more likely to issue debt

After-tax cost of debt increases; firms are less likely to issue debt

After-tax cost of debt decreases; firms are more likely to issue debt

After-tax cost of debt decreases; firms are less likely to issue debt