Which of the following statements is most correct?

Select one:

A. Because financing with debt increases a firm's financial risk, increasing a company's debt ratio will always increase its WACC.

B. Because debt financing is generally less expensive than equity financing, raising a company's debt ratio will always reduce its WACC.

C. An increase in a firm's debt ratio will generally decrease both its marginal cost of debt and marginal cost of equity financing. However, this action may still serve to raise the firm's WACC.

D. An increase in a firm's debt ratio will generally increase both its marginal cost of both debt and marginal cost of equity financing. However, this action may still serve to lower the firm's WACC.

E. In general, a firm's cost of equity should not be influenced by the use of debt in its capital structure.