Please provide a brief explanation.

QUESTION 10.

As the firm borrows at the low cost of capital for debt, its equity cost of capital rises, but the net effect is that the firms WACC is unchanged.

True

False

QUESTION 11

The interest paid by a firm is tax-deductible and is referred to as interest tax shield. This is the additional amount that a firm would have paid in taxes if it did not have any debt in its capital structure.

True

False

QUESTION 12

In a world with taxes, interest tax shield tends to reduce a firms weighted average cost of capital.

True

False