Which of the following statements is most accurate?

1. Increasing a companys debt ratio will typically increase the cost of equity financing. However, this action still may reduce the companys WACC.

2) Since debt financing is cheaper than equity financing, raising a companys debt ratio will always reduce its WACC.

3) Since debt financing raises the firm's financial risk, increasing a companys debt ratio will always increase its WACC.

4) Increasing a companys debt ratio will typically reduce the cost of equity financing. However, this action still may raise the companys WACC.