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Which of these would increase a company's WACC?

  1. A A fall in the risk-free rate
  2. B An increase in the company's business risk and beta
  3. C Repaying expensive debt with cheaper debt
  4. D A reduction in the market risk premium
Answer

An increase in the company's business risk and beta

Higher beta raises the cost of equity through CAPM, which raises WACC. The other options all reduce the cost of one component of capital.

All Finance MCQs

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