Question

Which of the following statements is correct?

A. The WACC measures the before-tax cost of capital.
B. An increase in the firm's marginal corporate tax rate will decrease the weighted average cost of capital.
C. Flotation costs can decrease the weighted average cost of capital.
D. None of these statements is correct.

Answer 1

The answer is B. An increase in the firms marginal corporate tax rate will decrease the weighted average cost of capital.