QUESTION 6 Consider a firm operating in a Modiglian Miller world without taxes and without other financial markets imperfections. The firm has 50,000 shares trading at a price of 10 per share, and generates a permanent income of $50,000 per year. Suppose that the firm is considering whether to sue $250.000 of debt at an interiorate of 4% and repurchase 25,000 shares. Denote the return on equity, Re, and the debt-to-equity ratio, D/E Which statements are correct? D D/E will increase from 0 to 1 Correct DVE will increase from 0 to 0.5 Re will increase from 10% to 16% Re will increase from 10% to 13% Re will increase from 10% to 20%