Which of the following statements is CORRECT?<\/p>
<\/p>
a. Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce its WACC.<\/p>
<\/p>
b. Since debt financing raises the firm's financial risk, increasing a company's debt ratio will always increase its WACC.<\/p>
<\/p>
c. Increasing a company's debt ratio will typically reduce the marginal cost of both debt and equity financing. However, this action still may raise the company's WACC.<\/p>
<\/p>
d. Increasing a company's debt ratio will typically increase the marginal cost of both debt and equity financing. However, this action still may lower the company's WACC.<\/p>
<\/p>
e. Since a firm's beta coefficient it not affected by its use of financial leverage, leverage does not affect the cost of equity.<\/p>", "transcribed_text": "", "related_book": { "title": "Calculus Early Transcendentals", "isbn": "538497904, 978-0538497909", "edition": "7th edition", "authors": "James Stewart", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/786.jpg", "uri": "\/textbooks\/calculus-early-transcendentals-7th-edition-786", "see_more_uri": "" }, "free_related_book": { "isbn": "979-8862708806", "uri": "\/textbooks\/beyond-limits-unlocking-rapid-business-growth-for-consultants-coaches-and-advisors-master-the-art-of-doubling-your-business-in-just-90-days-979-8862708806-307318", "name": "Beyond Limits Unlocking Rapid Business Growth For Consultants Coaches And Advisors Master The Art Of Doubling Your Business In Just 90 Days", "edition": "" }, "question_posted": "2024-06-06 00:11:52", "see_more_questions_link": "\/study-help\/questions\/business-management-leadership-2023-June-05", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/refer-to-the-preceding-information-for-paulcrafts-acquisition-of-switzers-common-stock-assume", "description": "Refer to the preceding information for Paulcrafts acquisition of Switzers common stock. 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