inse nuus a) in the Miller and Modigliani models we discussed in class, we said that one early iteration of the model suggested that capital structure was irrelevant. What did the model suggest was the principal driver of firm value? Choose the best answer. (2 Marks) OFirm value is driven by the productive assets of the firm Ocannot be determined Ointerest rates b) The value of Smith Limited is $300m and the company is unlevered. They decide to borrow $50m worth of debt for four years (it is expected to be renewed in perpetuity). The tax rate is 30% and the interest rate is 10%. Calculate the value of the levered firm. (2 Marks). Answer in millions. Do not include a $ symbol or Answer: $ million c) If a firm were to adopt a restrictive working capital management policy i. What would happen to the expected inventory balances? (Choose the most appropriate answer.) (2 Marks) OINCREASE ODECREASE ONO CHANGE ii. What would be the impact on short term funding over the business cycle? (Choose the most appropriate answer.) (2 Marks) CINCREASE ODECREASE ONO CHANGE d) Charisma Limited has noticed that operating cycle is a lot higher than its competitors and is wondering why this has occurred. Choose whether the following account balances should be increased or decreased to reduce the operating cycle. (4 Marks) (Choose the most appropriate answers.) Accounts Receivable Accounts Payable Inventory Cash Balance