Which of the following statements is FALSE? The greater the use of debt, the greater the interest expenses and the greater the tax savings due to tax deductibility of debt interest payments. As an MNC increases its proportion of equity, the rate of return required by potential new shareholders will increase to reflect the higher probability of bankruptcy. There is an advantage to using debt rather than equity as capital because the interest payments on debt are tax deductible. A firm creates equity by retaining earnings or by issuing new stock