Q1) Under the M&M world with corporate taxes, the value of a firm is maximized when the firm is financed with 100% debt.

True

False

Q2) Under the M&M world with perfect capital markets, the cost of equity is independent of its capital structure.

True

False

Q3) Under the M&M world with perfect capital markets, a firms value should rise with increased leverage because debt is cheaper than equity.

True

False

Q4) Under the M&M world with perfect capital markets, a firms average cost of capital (i.e. pre-tax WACC) falls for increases in debt as long as the firm avoids truly excessive leverage.

True

False