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Which of the following statements in incorrect? A. The benefit of an interest tax shield is captured by the equity holders. B. Under MM II

Which of the following statements in incorrect?

A. The benefit of an interest tax shield is captured by the equity holders.

B. Under MM II assumptions, the expected return on equity is equal to the expected return on assets for a levered firm.

C. Costs of financial distress are costs arising from bankruptcy or distorted business decisions before bankruptcy.

D. Debt financing affects neither the operating risk nor the business risk of the firm.

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