Question 5 (a) Modigliani and Miller showed that when firms have to pay taxes, a firms value increases with leverage. Briefly discuss what prevents a firm from taking on high levels of debt. (6 marks) (b) Maturity Rating Features Bond A 10 years AA Put provision Bond B 10 years A Call provision Appraise which bond has the higher yield to maturity. (7 marks) (c) Your company buys from a supplier who offers credit terms of 3/10 net 130. Discuss whether your company should or should not pay cash for the goods it buys if it can borrow funds from the bank at 10% per annum. (Use a 360-day year for your computations.) (7 marks)