Question

Which of the following statements is CORRECT?
a. WACC calculations should be based on the before-tax costs of all the individual capital components.
b. Flotation costs associated with issuing new common stock normally reduce the WACC.
c. If a company's tax rate increases, then, all else equal, its weighted average cost of capital will decline.
d. An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.
e. A change in a company's target capital structure cannot affect its WACC.

Answer

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