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Question M2 [5 Points] Which of the following is False? a) The return on levered equity is affected by the financial leverage even in the

Question M2 [5 Points] Which of the following is False?

a) The return on levered equity is affected by the financial leverage even in the presence of taxation.

b) The return on unlevered equity is equal to the pre-tax wacc if the company follows a constant debt-to equity ratio policy.

c) If the bankruptcy probability of a firm increases, the yield to maturity of a bond might increase even if the bond expected return stays constant.

d) None of the above

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