MCQ $2$: Atul, a fresh MBA graduate is trying to convince his superiors at Orange Bolts Ltd$.$ to

finance the expansion of the company via raising debt. Orange is currently debt free. What is the

most likely impact on its WACC?

a$)$ WACC will rise as D$/$E ratio for Orange will increase

b$)$ WACC will fall as Orange benefits from lower cost of funding

c$)$ WACC will fall since WACC is inversely related to level of Debt irrespective of D$/$E

ratio

d$)$ WACC will rise as WACC is directly related to level of debt irrespective of D$/$E ratio