problem: Which of the following statements is most correct?
[A] Increasing a company's debt ratio will typically reduce the marginal cost of both debt and equity financing; however, it still may raise the company's WACC.
[B] Statements A and C are correct.
[C] None of the statements above is correct.
[D] Since debt financing raises the firm's financial risk, increasing a company's debt ratio will always increase the company's WACC.
[E] Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce the company's WACC.