. State whether the statement is TRUE/FALSE:

1. Capital structure represents the mix of equity and interest-bearing debt used by a firm.

2. Business risk reflects the added variability in earnings available to a firm's shareholders.

3. A firm can estimate its cost of debt by finding the yield on bonds issued by other firms with similar ratings and maturities.

4. If before tax cost of debt is 9% and the firm has a 34% marginal tax rate, after the tax cost of debt is 5.94%.

5. No adjustments are made in the cost of preferred stock for taxes since preferred stock dividends are not tax-deductible.