How would each of the following affect a firm's after-tax cost of debt, rdT; its cost of equity, rs; and its weighted average cost of capital, WACC? Indicate by a plus (+), a minus (-), or a zero (0) if the factor would increase, decrease, or have an indeterminate effect on the item in question. Assume other things are held constant. Be prepared to justify your answer, but recognize that some of the parts probably have no single correct answer; these questions are designed to stimulate thought and discussion.

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Effect on rat WACC a. The corporate tax rate is lowered. b. The Federal Reserve tightens credit. c. The firm significantly increases the proportion of debt it uses. d. The dividend payout ratio (percent of earnings paid as dividends) is increased. e. The firm doubles the amount of capital it raises during the year f. The firm expands into riskier new areas. g. The firm merges with another firm whose earnings are countercyclical both to those of the first firm and to the stock market h. The stock market falls drastically, and the value i. Investors become more risk averse. j. The firm is an electric utility with a large of the firm's stock falls along with the rest. investment in nuclear plants. Several states propose a ban on nuclear power generation.