True/False. Briefly explain.

(1.5 points) The cost of equity is generally much higher than the after-tax cost of debt. Therefore, increasing the debt ratio will always lower the cost of capital

(1.5 points) If dividend payments to stockholders are tax deductible to corporations, the optimal debt ratios of these firms will decrease.

(1.5 points) Firms with large tax loss carry-forwards will get a smaller benefit from borrowing than firms without these tax loss carry-forwards. (Tax-loss carry-forwards are losses in prior periods that are accumulated and can be offset against income in future periods to reduce taxes)