Which One of the Following Will Increase the WACC of a Firm

question 294

Multiple Choice

Which one of the following will increase the WACC of a firm?

• A) An increase in the marginal tax.
• B) An increase in the debt-equity ratio.
• C) An increase in the risk-free rate of return.
• D) A decrease in the level of risk of a project.
• E) A decrease in the yield-to-maturity of the bonds.

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Definitions:

Investor

A person or organization that invests money expecting to earn financial profits.

Bond

A security reflecting a relatively long-term debt relationship between the issuer (borrower) and the buyer (lender).

Financial Market

A marketplace where buyers and sellers engage in the trade of assets such as stocks, bonds, currencies, and derivatives.

Securities

Financial instruments representing an ownership position, a creditor relationship, or rights to ownership, such as stocks, bonds, and options.