Which of the following is true about the trade-off theory of capital structure (Moderate View or Static View)?

		Value of the firm increases with debt financing.
		Value of the firm decreases with debt financing..
		Value of the firm will be unaffected by the manner in which a firm finances its assets.
		Value of the firm first rises, riches a maximum and then falls as the firm uses more debt

Integrate Inc. plans to maintain its optimal capital structure of 30 % debt, 20 % preferred stock and 50 % common stock far into future. The required return on each component is; debt--10% (before tax), preferred stock--11%, common stock--18 %. Assuming a 40% marginal tax rate, what is the cost of capital for Sugar Land supply?