Question 114 WACC, capital structure, risk
A firm's WACC before tax would decrease due to:
(a) the firm's industry becoming more systematically risky, for example if it was a mining company and commodities prices varied more strongly and were more positively correlated with the market portfolio.
(b) the firm's industry becoming less systematically risky, for example if it was a child care centre and the government announced permanently higher subsidies for parents' child care expenses.
(c) the firm issuing more debt and using the proceeds to repurchase stock.
(d) the firm issuing more equity and using the proceeds to pay off debt holders.
(e) none of the above.
Copyright © 2014 Keith Woodward