Question: A company is considering increasing its leverage ratio from 20% to 35%. The company's interest coverage will likely become close to 2, so the company's

A company is considering increasing its leverage ratio from 20% to 35%. The company's interest coverage will likely become close to 2, so the company's rating could become lower than BBB-. Which of the following options is not correct?

The loss of an investment-grade rating can negatively impact the firm's ability to raise debt in the future.

The possibility of a rating downgrade is an important factor to consider before issuing new debt.

The company is likely to pay a significantly higher interest rate on the new debt that it is planning to issue.

The company should not pay attention to the rating downgrade. As long as the debt is priced fairly by the market, the NPV of debt should be equal to zero.

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