Answer: Decrease the company's weighted average cost of capital (WACC).

The correct answer is **A** because the tax deductibility of interest on debt reduces the effective marginal cost of debt, as it reflects the income shielded from taxation (tax shield). The marginal cost of debt is calculated as \( r_d(1 - t) \), where \( r_d \) is the cost of debt and \( t \) is the marginal tax rate. An increase in the marginal tax rate enhances the tax shield, thereby lowering the marginal cost of debt and, consequently, the WACC. Options **B** and **C** are incorrect because the WACC is affected by changes in the tax rate due to the tax shield effect.

Author: LeetQuiz Editorial Team