Assuming no corporate taxes, the independence hypothesis suggests that a firm's weighted average
cost of capital will
A) increase proportionally with the increase in the amount of debt a firm uses.
B) decrease proportionally with the increase in the amount of debt a firm uses.
C) remain constant regardless of capital structure because the cost of debt and the cost of equity
are the same.
D) remain constant because the cost of equity will be increasing as the amount of debt increases
due to the increased risk.
D
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