What impact will each of the following events have on a firm weighted average cost of capital? The...

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What impact will each of the following events have on a firm weighted average cost of capital?

The corporate tax rate is lowered
The firm increases its leverage
The firm's stock price falls dramatically
New York City imposes a stamp tax on share issues floated there.
The government allows private investors to exclude up to $1,000 in dividends from taxable income.
The firm sells a division and replaces it with a less risky project.

Robert · Accepted Answer

1) The lowering of the corporate tax rate would lead to lowering of the tax shield offered by 
interest paid on debt. Hence, the post-tax cost of debt would increase leading to an 
increase in the weighted average cost of capital.
2) As the firm increases the leverage, the weightage of debt would increase while that of 
equity would decrease. Since cost of debt is almost always lower than equity, hence,

What impact will each of the following events have on a firm weighted average cost of capital? The corporate tax rate is lowered The firm increases its leverage The firm's stock price falls...

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