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:

Marginal Utility

Marginal utility represents the change in satisfaction or utility that an individual gains from consuming one additional unit of a good or service.

Marginal Cost

The increased cost resulting from manufacturing one extra unit of a product or service.

Feelings of Guilt

Feelings of guilt involve emotional responses that occur when an individual believes they have violated moral standards or caused harm, impacting their psychological well-being and behavior.

Indifference Curve

A graph representing combinations of goods among which a consumer is indifferent, reflecting preferences.