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All other inputs constant, if a firm's tax rate decreases and they use debt in their...

All other inputs constant, if a firm's tax rate decreases and they use debt in their capital structure, their WACC will __________.
A. increase
B. decrease
C. stay the same
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Answer #1

WACC means weighted average cost of capital ,WACC represents investors opportunities cost of taking  risk to invest funds in the company .and if tax rate decreases then the investor opportunity to get risk free returns should increases. there for cost of capital of the company (WACC) should increases .

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