All Else Constant, Which One of the Following Will Increase

question 26

Multiple Choice

All else constant, which one of the following will increase the capital structure weight of debt as used in the computation of a firm's weighted average cost of capital?

• A) An increase in the firm's tax rate.
• B) A decrease in the market value of the firm's debt.
• C) An increase in the number of preferred shares outstanding.
• D) A decrease in the number of common shares outstanding.
• E) An increase in the prepayment of a bond issue.