Which One of the Following Changes Would Tend to Increase

question 31

Multiple Choice

Which one of the following changes would tend to increase the WACC for a tax-paying firm?

• A) Decrease the proportion of equity financing
• B) Increase the market value of the debt
• C) Decrease the proportion of debt financing
• D) Decrease the market value of the equity

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Definitions:

Perfectly Elastic

A situation in which any small change in price leads to an infinite change in quantity demanded or supplied.

Payroll Tax

Charges instituted on both employers and workers, typically a percentage of the employment remunerations.

Tax Burden

the measure of the total taxes imposed on individuals or businesses by the government.

Payroll Tax

Taxes imposed on employers and/or employees, typically based on the wages or salaries that employees earn.