Assuming no corporate taxes, the independence hypothesis suggests that a firm’s weighted average cost of capital will: a

Assuming no corporate taxes, the independence hypothesis suggests that a firm’s weighted average cost of capital will:

a. remain constant because the cost of equity will be increasing as the amount of debt increases due to the increased risk.

b. increase proportionally with the increase in the amount of debt a firm uses.

c. remain constant regardless of capital structure because the cost of debt and the cost of equity are the same.

d. decrease proportionally with the increase in the amount of debt a firm uses.