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:

GAAP

Generally Accepted Accounting Principles, the standard framework of guidelines for financial accounting used in any given jurisdiction.

IFRS

International Financial Reporting Standards, a set of accounting rules and standards that define how transactions and other accounting events should be reported in financial statements. They are designed to be globally consistent to enhance international comparability and quality of financial statements.

Cash Flow Reporting

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.

Interest Paid

The amount paid over a period for the use of borrowed funds, typically expressed as an annual percentage of the loan amount.