Under M&M with corporate taxes Theory, Which of the following statements is most correct?

Question 8 options:

a. Since debt financing raises the firm's financial risk, raising a company's debt ratio will always increase the company's WACC.

b. Since debt financing (after-tax) is cheaper than equity financing, raising a company's debt ratio will always reduce the company's WACC.

c. Increasing a company's debt ratio will typically reduce the marginal cost of both debt and equity financing; however, it still may raise the company's WACC.

d. Statements a and c are correct.

e. None of the statements above is correct.