Which of the following statements is CORRECT?

A. A change in a company's target capital structure cannot affect its WACC.
B. WACC calculations should be based on the before-tax costs of all the individual capital components.
C. Flotation costs associated with issuing new common stock normally reduce the WACC.
D. If a company's tax rate increases, then, all else equal, its weighted average cost of capital will decline.
E. An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.


Answer: D

Business

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