Question 74 WACC, capital structure, CAPM
A firm's weighted average cost of capital before tax (rWACC before tax) would increase due to:
(a) The firm issuing more debt and using the proceeds to repurchase stock.
(b) The firm issuing more equity and using the proceeds to pay off debt holders.
(c) The firm's industry becoming more systematically risky, for example if it was a mining company whose performance became more sensitive to countries' GDP growth, so the correlation of the firm's returns with the market was higher.
(d) The firm's industry becoming less systematically risky, for example if it was a child care centre and the government announced higher subsidies for parents using child care centres, so the correlation of the firm's returns with the market was lower.
(e) None of the above.