Attention: Due to a bug in Google Chrome, this page may not function correctly. Click here to learn more. 2. The weighted average cost of capital Aa Aa E The importance of knowing a firm's cost of capital Warm Duck Brewing Company has two divisions: one is very risky, and the other exhibits significantly less risk. The company uses its investors' overall required rate of return to evaluate its investment projects. It is most likely that the firm will become: Less risky over time, and its value will decrease Riskier over time, and its value will decrease Less risky over time, and its value will increase Riskier over time, and its value will increase O Which of the following statements is correct? O A firm's weighted average cost of capitalshould decrease if its tax rate increases, but the yield to maturity of its noncallable bonds remains the same and all other factors are held constant. A firm's after-tax cost of preferred stock may be significantly less than its before-tax cost, because issuing preferred stock dividends creates a tax shelter. The market value of a firm's debt and equity will continuously change throughout the day, but the book value of debt and equity tends to stay more stable over time. Consequently, the firm should use the book-value weight to define its optimal capital structure. 0