All else constant, the weighted average cost of capital for a firm will decrease if:
A) a firm’s bonds start selling at a premium rather than at a discount.
B) the market risk premium increases.
C) the firm replaces some of its debt with preferred stock.
D) corporate taxes are eliminated.
E) the dividend yield on the common stock increases.
My first answer is "none of the above." But if I have to choose, I’ll choose "A".
on Sep 16th, 2009 at 12:24 pm
My first answer is "none of the above." But if I have to choose, I’ll choose "A".
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