Assuming that a company's after-tax cost of debt is lower than its' cost of equity, what will

Fantastic news! We've Found the answer you've been seeking!

Question:

Assuming that a company's after-tax cost of debt is lower than its' cost of equity, what will happen to the company's WACC as cash increases and everything else stays unchanged?

Hint: An increase in cash lowers net debt.

Group of answer choices

a-WACC is unchanged

b-WACC goes down

c-It depends on the capital structure

d-WACC goes up

Related Book For answer-question

Essentials of Business Statistics Communicating With Numbers

ISBN: 978-0078020544

1st edition

Authors: Sanjiv Jaggia, Alison Kelly

See More Books

Posted Date: Jan 12, 2021 02:41 AM

See More Questions

A cell starts at a volume of 600 m3 and loses volume at a rate of 2 m3 per second.
A cell starts at a volume of 400 m3 and gains volume at a rate of 3 m3 per second.
A cell starts at a volume of 900 m3 and loses volume at a rate of 2t m3 per second.
Use the following timeline to answer the question(s) below. 0 1 2 3 $600 $1200 $1800 At an annual interest rate of 7%, the future value of this timeline in year 3 is?
The ACLS survey in Example 3.4 had nonresponse. Calculate the response rate in each stratum for the survey. What model was adopted for the non response in Example 3.4? Is there evidence that the non...
Although tea is the world's most widely consumed beverage after water, little is known about its nutritional value. Folacin is the only B vitamin present in any significant amount in tea, and recent...
The Kowal Manufacturing Company employs about fifty production workers and has the following payroll procedures. The factory foreman interviews applicants and on the basis of the interview either...
Restore is a small repair shop that makes customized parts for old equipment. All customer orders must be machined first then polished. Determine a sequence that will minimize the time required to...
Estimate the after tax interest rate on debt. The effective tax rate for Cooper for the year ended October 31, 2022 was 18.8%. Use average debt in your calculation THE COOPER COMPANIES, INC. AND...
To foster the development of self-efficacy, parents and caretakers should: A. provide tasks which a child can easily achieve: B. structure tasks that are a challenge but with a high likelihood of...
Sherry Johns is one frustrated project manager. Before accepting her current position at ABC Construction, Inc., she had been a project manager at a competing firm, Construction Cor- poration, LLC....
Shown as follows is a segmented income statement for Drexel-Hall during the current month: Sales Variable costs Contribution margin Traceable fixed costs: controllable Performance margin Traceable...
Discuss why disclosures are important whenever there is a change in accounting method or estimate. To elaborate on this, discuss the following: When is a change acceptable? How do disclosures assist...
How do operational plans help an organisation achieve its strategic and business goals?
Joel works in a program for young people with disabilities to help them develop their social, educational and independent living skills. Connor, a 15-year-old participant, engages in behaviour of...
Harry Styles has the choice between investing in a City of San Diego bond at 3 . 0 0 percent or investing in a Nike Inc bond at 4 . 2 5 percent. Assuming that both bonds have the same nontax...
To analyze population health, healthcare organizations look at data from hospitals, payers, primary care providers, specialists, pharmacies, public health organizations, and patients. Read the...
Give codons for the following amino acids: (a) Th (b) Asp (c) Thr
For a continuous random variable X, P (20 X 40) = 0.15 and P(X. 40) = 0.16. Calculate the following probabilities. a. P(X < 40) b. P(X < 20) c. P(X= 40)
When estimating the selling price of a used sedan as a function of its age using the model Price = Î²0 + Î²1Age + , a researcher gets the following ANOVA results: a. How many...
A price-earnings ratio or P/E ratio is calculated as a firms share price compared to the income or profit earned by the firm per share. Generally, a high P/E ratio suggests that investors are...
__________ is the special systems test that determines the time duration to process transaction data. (a) Peak load testing (b) Performance time testing (c) Unit testing (d) Recovery testing
The testing technique that requires devising test cases to exercise the internal logic of a software module is called ___________. (a) Black box testing (b) Special systems testing (c) Glass box...
Systems efficiency is defined as ___________. (a) Doing the thing in right way (b) Doing right thing (c) Doing right thing in right way (d) Any of these

Assuming that a company's after-tax cost of debt is lower than its' cost of equity, what will

Question:

Expert Answer:

Answer The correct option is b WACC goes down As the cash increas... View the full answer

Essentials of Business Statistics Communicating With Numbers

Students also viewed these accounting questions