Question

If a firm's marginal tax rate is increased, this would, other things held constant, lower the cost of debt used to calculate its WACC. True False

Answer 1

Answer:

The answer is "True".

Explanation:

The marginal rate is indeed the extra income tax about any dollar earned as income. Its annual tax rate is the total tax paid divided by the total earnings. This marginal rate of 10% will impose a tax of 10 cents on every following income spent. that's why the given statement is true because the cost of debt $= k\times (1-t)$   and its t value will increase the cost of the decrease.