firm value will (decrease/increase/remain unchanged)?

Cost of equity will:(decrease/increase/remain unchanged)?

Weighted average cost of capital will:decrease/increase/remain unchanged)?

The present value of tax shields will decrease/increase/remain unchanged)?

c) Firm Z has a level of debt that is consistent with its target debt-to-equity ratio. Assuming taxes and information and transaction costs exist, what is the effect of an increase in debt?

Firm value will :decrease/increase/remain unchanged)?

Agency Cost will:decrease/increase/remain unchanged)?

Weighted average cost of capital will: decrease/increase/remain unchanged)?

The present value of tax shields will :decrease/increase/remain unchanged)?

b) The corporate tax rate suddenly decreases by a material amount. Assume no information or transaction costs. Consider the resulting capital structure effects only. (2 Marks)