1. What is a firm's capital structure? What ratios assess the degree of financial leverage in a firm's capital structure?
2. Describe the two Modigliani and Miller propositions, the key assumptions underlying them, and their relevance to capital structure decisions.
3. "the cost of debt is lower than the cost of equity. Interest paid on debt financing can be deducted from taxable income of the firm. Therefore, debt financing can help to reduce the firm's tax payment. Thuse fims should use maximum amount debt to finance its funding needs" Critically evaluate the above statements.