Which of the following statements is correct? A. A company decreases its debt-to-equity ratio from 0.8 to 0.6. The decline in equity beta will be smaller if the corporate tax rate is lower. B. A company decreases its debt-to-equity ratio from 0.8 to 0.6. The WACC will certainly increase in the presence of bankruptcy costs and corporate taxation. C. Leverage directly affects a firms business risk. D. Optimal capital restructuring is a negative NPV decision. E. Bankruptcy is an economic, not a legal process.

Why is the answer A.