M&M theory with tax (but no bankruptcy cost) supports which of the following:

I. Leverage increases both the cost of equity and the overall cost of capital

II. The value of the firm increases by the PV of the annual interest tax shield.

III. Cost of equity decreases as the firm's debt-equity ratio decreases.

IV. a firm's WACC increases as the firm's debt-equity ratio decreases.

A. II only.

B. I and II only.

C. II and III only

D. I, II and IV only

E. II, III and IV only