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sibelly
sibelly asked in Education & ReferenceHomework Help · 1 decade ago

which one of the following will decrease the firm's weighted average cost of capital?

A firm has a cost of equity of 10 percent, a cost of preferred of 9 percent, and an aftertax cost of debt of 5 percent. Given this, which one of the following will decrease the firm's weighted average cost of capital?

1 redeeming the bond issue

2 decreasing the debt-equity ratio

3 issuing new equity securities

4 increasing the systematic risk level of the firm

5 issuing new debt

3 Answers

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  • chaigajue
    1 decade ago

    equity is low cost fund.

    3 is correct

    2 is effect of 3

  • Nick
    1 decade ago

    2 is correct.

  • Nabeel
    6 years ago

    (5) is correct issuing new debt > 100% confirm

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