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Question Workspace

Which of the following statements is CORRECT?

a$.$ If a company's tax rate increases, then, all else equal, its weighted average cost of capital will decline.

b$.$ An increase in the risk$-$free rate will normally lower the marginal costs of both debt and equity financing.

c$.$ Flotation costs associated with issuing new common stock normally reduce the WACC.

d$.$ WACC calculations should be based on the before$-$tax costs of all the individual capital components.

e$.$ A change in a company's target capital structure cannot affect its WACC.