When Corporate Taxes Are Considered, How Does Leverage Affect the WACC

question 58

Multiple Choice

When corporate taxes are considered, how does leverage affect the WACC?

• A)an increase in leverage will be offset by a decrease in equity financing, thus leaving WACC unchanged.
• B)changes in leverage will affect the WACC only if the interest rate on debt changes.
• C)increased leverage will increase the WACC.
• D)increased leverage will decrease the WACC.

Distinguish between different types of banking regulations and their purposes.

Analyze the effects of banking deregulation and its consequences on the banking system.

Understand the concept and implications of moral hazard in the banking sector.

Recognize the role and impact of money market mutual funds in competition with traditional banking.

---

Definitions:

Bilateral Trade Surpluses

The condition where a country has a positive trade balance (exports exceed imports) with another specific country.

Imposes a Tariff

The action by a government to establish a tax on imported or, occasionally, exported goods.

Korean Imports

Goods and services bought by residents of a country from Korea, which could include electronics, vehicles, and other products.

U.S. Market

The economic environment for buying and selling goods and services within the United States, encompassing all activities of production, promotion, and distribution.