1. If the firm decreases its debt ratio, both the debt and the equity will become riskier. The debtholders and equity holders will require a higher return to compensate for the increased risk.

True or False

2. The weighted-average cost of capital is the expected rate of return on a portfolio of all the firm's securities, adjusted for the tax savings on interest payments.

True or False

3. A change in the company's capital structure will change the amount of taxes paid but will not change the WACC.

True or False

6. A bankruptcy or distorted business decisions before bankruptcy can lead to firms' costs of financial distress.

True or False