Which of the following statements does NOT correctly explain the effect of additional debt on the weighted average cost of capital (WACC)?

Debtholders prior and fixed claim increases the risk of stockholders residual claim, so the cost of stock (rs) goes up.

Additional debt also increases the pre-tax of cost of debt (rd) because the increased risk of bankruptcy.

The net effect of additional debt on WACC is to increase WACC.

The net effect of additional debt on WACC is uncertain.