17. Other thinge bold constant, time that ... note that can be sold castly (14ke trucke) tend to use more debt than firma whose assets are harder to sell (1.ke those engaged in RED"). .. True b. Talso 18. Other thinga held constant, the lower firm's tax rate, the more logical it 1. for the firm to une debt. a. True b. False 19. An increase in the debt ratio will generally have no effect on which of these items? a. Business risk. b. Total ciok. e. Tinancial risk. d. Market riak. e. The firm's beta. 20. Which of the following statements is CORRECT? a. Since debt financing raises the firm's financial risk, increasing the target debt ratio will always increase the WACC. b. Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce its WACC. e. Increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing. However, this action still may raise the company's HACC. d. Increasing a company's debt ratio will typically increase the marginal conts of both debt and equity financing. However, this action still may lower the company's HACC. e. Since a firm's beta coefficient is not affected by its use of financial leverage, leverage does not affect the cost of equity. 21. Based on the information below, what is the firm's optimal capital structure? a. Debt 408: Equity 608: EPS = $2.95; Stock price = $26.50. b. Debt = 508: Equity = 50#: EPS = $3.05; Stock price - $28.90. c. Debt = 60; Equity = 408: EPS = $3.18; Stock price = $31.20. d. Debt = 80; Equity = 204: EPS = $3.42: Stock price = $30.40. e. Debt - 708: Equity = 30$; EPS = $3.31: Stock price - $30.00. 22. Which of the following would tend to increase a firm's target debt ratio, other things held constant? MacBook Air