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Which of the following would NOT cause the cost of a firm's debt to increase? Group of answer choices The stock market goes down. A credit downgrade. The firm becomes the subject of a significant lawsuit. The economy enters recession.

A firm pays the bank 7% on its loan but is in a high tax bracket of 40%. What is the right cost of debt that managers should use in deciding how costly debt financing is? Group of answer choices 7% 2.8% 4.2% 5.6%

Which one of the following is a correct statement regarding a firm's weighted average cost of capital (WACC)? Group of answer choices The WACC can be used as the required return for all new projects with similar risk to that of the existing firm. A reduction in the risk level of a firm will tend to increase the firm's WACC. An increase in the market risk premium will tend to decrease a firm's WACC. The WACC will decrease when the tax rate decreases for all firms that use debt financing. A 5% increase in a firm's debt-equity ratio will tend to increase the firm's WACC.