7. MM Proposition II without taxes implies that the required return on equity is: A. a result of homemade leverage. B. inversely related to the firm's debt-to-equity ratio. C. a linear function of the firm's debt-to-equity ratio. D. independent of the firm's capital structure. E. a linear function of the market's rate of interest.

8. Which one of these statements is correct? A. Firms across all industries in the U.S. tend to have similar debt-to-equity ratios. B. The banking industry tends to have the lowest debt-to-equity ratio of any U.S. industry. C. Financial leverage lowers risk to equity holders. D. MM Propositions ignore bankruptcy costs. E. MM Propositions without taxes illustrate that a firm's overall cost of capital is affected by leverage.