Suppose that Exxon Mobil faces a marginal tax rate of 21% and that the interest payments to debt are tax deductible. In addition, capital markets are complete and efficient and the CAPM holds. Suppose that Exxon Mobil decides to increase its target leverage ratio from 10% to 20%, holding everything else constant. Which of the following statements is correct?

Group of answer choices

1: Exxon Mobil's after-tax WACC would decrease and its expected return on assets would increase.

2: Exxon Mobil's after-tax WACC would decrease and its expected return on assets would stay the same.

3: Exxon Mobil's after-tax WACC would increase and its expected return on assets would also increase.

4: Exxon Mobil's after-tax WACC would increase and its expected return on assets would stay the same.