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For each of the following theories of capital structure, briefly state/indicate what happens to the (i) cost of equity, (ii) WACC, and (iii) value of

For each of the following theories of capital structure, briefly state/indicate what happens to the (i) cost of equity, (ii) WACC, and (iii) value of the firm as the debtequity ratio increases. [Example answers: stays the same, , , then , then .]

M&M World with No Taxes

M&M World with Taxes

Tradeoff Theory

Cost of Equity

Weighted Average Cost of Capital

Value of the Firm

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