In a world with no taxes, a firm's capital structure is irrelevent meaning that WACC is constant for all levels of D/E.TrueFalse

WACC always reflects the fair value return on a firm's assets regardless of whether or not interest expense is tax deductible

TrueFalse

If interest expense is tax deductible, issuing debt creates a new asset whose value equals the present value of the avoided tax due to the interest expense.TrueFalse

In a world where interest expense is tax deductibile and bank-ruptcy costs are significant, there is an optimal capital structure is when the marginal increase in the tax shield is offset by marginal bankprutcy costs.TrueFalse

A firm's cost of equity(r_e)increases with increasing D/E due to greater business risk.TrueFalse