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

Select one:

a. If a companys tax rate increases, then, all else equal, its weighted average cost of capital will increase.

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

c. A companys cost of debt is the interest rate on new debt, not that on already outstanding debt.

d. Both the cost of debt and equity financing will decrease when a company merges with another firm whose earnings are counter-cyclical both to those of the first firm and those to the stock market.

e. A companys composite WACC should be adjusted to reflect each projects risk.