The weighted average cost of capital The importance of cost of capital Income Corp. has two divisions: one is very risky, and the other has significantly less risk. The company uses its investors' overall required rate of return to evaluate projects. It is most likely that the firm will become: Less risky over time, and its value will decrease Riskier over time, and its value will increase Riskier over time, and its value will decrease Less risky over time, and its value will increase Which of the following statements is correct? A firm's WACC should decrease if its tax rate increases, but the yield to maturity of its noncallable bonds remains the same and all other factors are held constant. The market value of a firm's debt and equity will continuously change throughout the day, but the book value of debt and equity tends to stay more stable over time. Consequently, the firm should use the book-value weight to define its optimal capital structure. If a firm wants to lower its cost of debt, it can simply issue debt with a lower coupon rate