Which of the following statements about the cost of capital is CORRECT ?

Select one:

a. Both the cost of debt and equity financing will decrease when a firm increases its debt/asset ratio.

b. The WACC of a firm will decrease when investors become more risk averse.

c. Both the cost of debt and equity financing will decrease when a nuclear plant company encounters a ban on nuclear power generation in certain states.

d. Both the cost of debt and equity financing will decrease when the Federal Reserve tightens credit.

e. An increase in the risk-free rate is likely to increase the marginal costs of both debt and equity financing.