The mix of debt and equity funding in the capital structure of the company is a question of how much financial risk can be added on to the operating risks of the business. Management is trying to optimize its capital structure to reduce its WACC. Adding more debt as a percentage of total capital is attractive due to the lenders' lower return expectations, and the fact that debt interest is a tax expense that lowers taxable income (whereas dividends to shareholders are not tax deductible). Too much debt leverage however increases the risk of financial distress in recessions or unanticipated events like the Covid virus related shutdowns - therefore management must use their best judgement in determining how much is too much debt in their quest to lower the company's WACC. True False