i. According to MM propositions, in a world with no taxes, the weighted average cost of capital for a levered firm is the same as the weighted average cost of capital for an unlevered firm. ii. Leverage can raise a firm's expected earnings per share and its return on equity, but it also increases the volatility of earnings per share and the riskiness of its equity. As a result, in a world with no taxes, shareholders are not better off if the firm takes on debt, and the value of equity is unchanged. iii. In a world with taxes, because interest expense is tax deductible, leverage increases the total amount of income available to all investors. Hence, the firm can increase its value by taking on more debt. iv. In a world with taxes, if a firm issues more debt and uses the proceeds to pay dividends, the price per share of the firm's stock will rise because of the effect of present value of tax shield ii only iv only ii and iii iii only i and