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AA is considering changing its capital structure.

AA is considering changing its capital structure. The following information is currently relevant to AA:

The gearing rating raising the new debt finance will be 50%.

Which THREE of the following statement about the impact of AA’s change in capital structure are true under Modigliani and Miler’s capital structure theory with tax.

A.

The cost of debt will increase above 4%

B.

The WACC will decrease below 7.6%

C.

The cost of equity will increase above 10%

D.

The cost of equity will decrease below 10%

E.

The WACC increase above 7.6

F.

The cost of debt remain unchanged at 4%

CIMA F3 Summary

  • Vendor: CIMA
  • Product: F3
  • Update on: Jul 29, 2025
  • Questions: 435
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