Which of the following statements is true? Please explain.

If Congress raised the corporate tax rate, this would lower the effective cost of debt.

If Congress raised the personal income tax rate, investors would demand more corporate debt financing, and companies debt ratios would increase.

The calculation for a firms WACC includes an adjustment to the cost of debt for taxes, since interest is deductible, and includes the cost of all current liabilities.

Since the money is readily available, the cost of retained earnings is usually a lot cheaper than the cost of debt financing.