Which of the following statements is CORRECT, holding other things constant?

Select one:

a. Increase in the corporate tax rate is likely to encourage firms to use more debt in its capital structure

b. Firms whose assets are relatively liquid tend to have relatively low bankruptcy costs, and tend to use relatively little debt

c. Increase in the personal tax rate is likely to increase the debt ratio of the average corporation

d. Changes in the bankruptcy code if they make bankruptcy less costly, would likely reduce the debt ratio of firms

e. Increase in a firms degree of operating leverage is likely to encourage use more debt in its capital structure