How do taxes affect the weighted average cost of, Financial Management

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How do taxes affect the weighted average cost of

How do taxes affect the weighted average cost of capital?

Taxes decrease both the cost of debt and the cost of equity because both interest payments and dividends are tax-deductible.

Taxes increase both the cost of debt and the cost of equity because both interest payments and dividends are tax-deductible.

Taxes decrease the cost of debt only because interest payments are tax-deductible and dividends are not.

Taxes decrease the cost of equity only because dividends are tax-deductible and interest payments are not.

Taxes have no effect because neither interest payments nor dividends are tax-deductible.

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