A firm increases the proportion of debt in its capital structure by issuing bonds and repurchasing shares with the funds raised. Which statement is the most correct?

a.

The required return on equity will decrease.

b.

Compared to the previous capital structure, shareholders will receive a larger share of liquidated assets than lenders if the company winds up.

c.

The increased interest expense will lead to a higher tax payable.

d.

This will amplify the return on equity.

e.

The firm is buying debt.