An Increase in a Corporation's Tax Rate Will Cause

question 39

Multiple Choice

An increase in a corporation's tax rate will cause:

• A) an increase in an unlevered firm's return on assets.
• B) a decrease in a levered firm's WACC.
• C) an increase in a levered firm's cost of debt.
• D) a decrease in an unlevered firm's cost of equity.

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Definitions:

Point Estimate

A single value given as an estimate of a parameter of a population.

Dependent Variable

A variable in statistical modeling and experiments whose value is dependent on that of one or more other variables.

Least Squares Estimate

A method of estimating the coefficients in a linear regression model by minimizing the sum of the squares of the differences between observed and predicted values.

Slope

A measure of the steepness or incline of a line, often calculated as the ratio of the vertical change to the horizontal change between two points on the line.