a) According to Miller and Modigliani proposition 2, what will happen to the cost of equity as leverage increases? (Choose the most appropriate answer.) (2 Marks) Increase Decrease No change b) Assume a firm is currently funded with 100% equity and has a market value of $500,000. What will the firm be worth if the corporate tax rate is 35%, and the firm issues $200,000 of permanent debt and uses the proceeds to repurchase stock? (2 Marks) Do not include a $ symbol or .. Answer: $ c) Choose the most appropriate answer in the following: i. If a firm adopts a restrictive working capital management policy, the impact on the working capital balance would be: (Choose the most appropriate.) (2 Marks) Increase Decrease No Change ii. What would be the impact of flexible working capital management policy on storage costs? (Choose the most appropriate.) (2 Marks) Increase Decrease No Change d) Max Limited has been instructed by its head office that it needs to reduce its cash conversion cycle. Choose whether the following account balances should be increased or decreased to decrease the CCC. (4 Marks) (Choose the appropriate answer.) Accounts Payable Increase or Decrease Accounts Receivable Increase or Decrease Inventory Increase or Decrease Cash Balance Increase or Decrease