The following two statements relate to the financial gearing of listed companies:

Statement One An increase in financial gearing normally increases both the required return and the risk of the ordinary shareholders.

Statement Two In perfect capital markets, with taxation, the company's capital structure does not affect its total market value, but it does affect the WACC.

What is the validity of the two statements?

Statement One Statement Two

	A.	True True
	B.	True False
	C.	False True
	D.	False False