17.Which one of the following statements is TRUE?

a. Increasing the weight of debt in a firm's capital structure will increase the required return on its equity.

b. The capital structure that maximizes the stock price is generally the capital structure that also maximizes earnings per share.

c. Since debt financing raises the firm's financial risk, increasing a company's debt ratio will always increase its WACC.

d. Since debt is cheaper than equity, increasing a company's debt ratio will always reduce its WACC.

e. When a company increases its debt ratio, the costs of equity and debt both increase. Therefore, the WACC must also increase.

18. Which of the following would be most likely to lead to a decrease in a firm's dividend payout ratio?

a. Its R&D efforts pay off, and it now has more high-return investment opportunities.

b. Its access to the capital markets increases.

c. Its accounts receivable decrease due to a change in its credit policy.

d. Its stock price has increased over the last year by a greater percentage than the increase in the broad stock market averages.

e. Its earnings become more stable.