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

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

II. Cost of equity increases as the firm's debt-equity ratio increases.

III. leverage increases both the cost of equity and the overall cost of capital

IV. Business risk increases as the firm's debt-equity ratio increases.

A. I only.

B. I and II only.

C. II and IV only

D. I, III and IV only

E. None of the above