Which one of these will increase a company's aftertax cost of debt? Multiple Choice A decrease...

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Which one of these will increase a companys aftertax cost of debt? Multiple Choice A decrease in the companys debt-equity r

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Answer 1

Answer #1

The answer is

A decrease in the company’s tax rate

After tax cost of debt = Cost before tax(1-Tax rate)

Hence, when tax rate decreases, cost of debt increases

Increase in credit rating will decrease the cost of debt

Increase in beta would affect cost of equity

Decrease in market rate of interest will decrease cost of debt

A decrease in debt equity ratio will not affect cost of debt

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Answer 2

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