Which of the following statements is true?

Question 27 options:

a) With zero taxes and zero bankruptcy costs, the value of the firm is independent of its debt equity ratio.

b) With taxes and zero bankruptcy costs, the value of the firm reaches a maximum and then declines as the debt equity ratio increases.

c) With taxes and bankruptcy costs, the value of the firm reaches a maximum when firms maximize their debt.

d) All of the above are true

Compared to non-investment grade firms, investment grade firms, in general, do not exhibit:

Question 28 options:

a) Higher coverage ratios

b) Higher cash flow to debt ratios

c) Lower return on assets

d) Higher profit margin