QUTUNY Other things held constant, which of the following events would be most likely to encourage a firm to increase the amount of debt in its capital structure? a. Its sales are projected to become less stable in the future. O b. The bankruptcy laws are changed in a way that would make bankruptcy more costly to the firm and its stockholders c. Management believes that the firm's stock is currently overvalued Od. The firm decides to automate its factory with specialized equipment and thus increase its use of operating leverage O e The corporate tax rate is increased. QUESTION 10 Which of the following statements is CORRECT? O a Generally, debt ratios do not vary much among different industries, although they do vary among firms within a given industry Electric utilities generally have very high common equity ratios because their revenues are more volatile than those of firms in most other 06. industries d e Airline companies tend to have very volatile earnings, and as a result they generally have high target debt-to-equity ratios. Wide variations in capital structures exist both between industries and among individual firms within given industries. These differences are caused by differing business risks and also managerial attitudes Since most stocks sell at or very close to their book values, book value capital structures are typically adequate for use in estimating firms weighted average costs of capital O