THE firm value ,cost of equity, Weighted average cost of capital, The present value of tax shields each will______

Identify the relevant changes resulting from the following independent scenarios. Focus on capital structure effects only and ignore any other indirect effects on the business. a) Firm X takes out a loan to repurchase shares. Assume the existence of corporate tax, but no information or transaction costs. (2 Marks) Firm value will: increase Cost of equity decrease remain unchanged Weighted aver: Cost of equity will increase Weighted average decrease remain unchanged The present value The present value of tax shields will: increase la decrease b) The corporate tax rate suddenly information or transaction costs. Co only. (2 Marks) ta remain unchanged Weighted average cost of capital will increase The present value of tax shields will: decrease remain unchanged b) The corporate tax rate suddenly amour