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Problem 4 (10 points) A firm's weighted average cost of capital (WACC) is influenced by many factors. Determine whether each of the following factors is
Problem 4 (10 points) A firm's weighted average cost of capital (WACC) is influenced by many factors. Determine whether each of the following factors is considered an internal factor, and therefore under the firm's control, or an external factor which, by definition, is beyond the firm's control. Indicate whether each factor will most likely lead to an increase, a decrease, or no change in the firm's weighted average cost of capital. Factor Internal or External Increase, Decrease, Or No Change The corporate tax rate increases Investor risk aversion increases The firm pays out more of its earnings in dividends The Federal Reserve raises interest rates The firm increases its debt ratio Problem 4 (10 points) A firm's weighted average cost of capital (WACC) is influenced by many factors. Determine whether each of the following factors is considered an internal factor, and therefore under the firm's control, or an external factor which, by definition, is beyond the firm's control. Indicate whether each factor will most likely lead to an increase, a decrease, or no change in the firm's weighted average cost of capital. Factor Internal or External Increase, Decrease, Or No Change The corporate tax rate increases Investor risk aversion increases The firm pays out more of its earnings in dividends The Federal Reserve raises interest rates The firm increases its debt ratio
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