2. Which of the following events is likely to encourage a company to raise its target debt ratio, other things held constant?

A. An increase in the company's operating leverage.

B. An increase in the corporate tax rate.

C. The Federal Reserve tightens interest rates in an effort to fight inflation.

D. The company's stock price hits a new high.

E. An increase in the personal tax rate.

Answer is_____A___. Why?