Explain Why you agree or disagree with the following statements. The answer should not be more than 3 sentences. Be specific in your answer and write only the most relevant explanations (Total Marks 6, Each 2).

1. A firm should select the capital structure that is fully levered (2 Marks)
2. Leveraged beta represents fundamental operating risk. (2 Marks)
3. MM Proposition I with no tax supports the argument that a firm should borrow money to the point where the tax benefit from debt is equal to the cost of the increased probability of financial distress (2 Marks)