If Interest Expense Lowers Taxes,why Does the WACC Not Decrease

question 47

Multiple Choice

If interest expense lowers taxes,why does the WACC not decrease indefinitely with the addition of more debt?

• A)The tax shield effect of debt will result in a lower cost of equity.
• B)Increasing debt too much can result in a greater likelihood of firm failure (financial distress).
• C)A firm's ordinary share price will not be affected by the amount of debt a firm uses.
• D)Too much ordinary equity increases the probability of bankruptcy.

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The natural or emotional urge that leads to sexual interest or attraction towards others.

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Hormones that stimulate or control the development and maintenance of male characteristics in vertebrates by binding to androgen receptors.