stock, preferred stock, and debt. Which of the following events would REDUCE its WACC? The market risk premium declines. The flotation costs associated with issuing new common stock increase. The company's beta increases. Expected inflation increases. The flotation costs associated with issuing preferred stock increase. QUESTION 19 Which of the following statements is CORRECT? When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible by the paying corporation. When calculating the cost of preferred stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation. Because of tax effects, an increase in the risk-free rate will have a greater effect on the after-tax cost of debt than on the cost of common stock as measured by the Higher flotation costs reduce investors' expected returns, and that leads to a reduction in a company's WACC. QUESTION 20 25%, what is the component cost of debt for use in the WACC calculation? Do not round your intermediate calculations. 6.60% 7.77% 7.30% 6.47% 8.09%