Each of the following statements is false or at least misleading. Explain why in each case.

(a) “A capital investment opportunity offering a 10 percent DCF rate of return is an attractive project if it can be 100 percent debt-financed at an 8 percent interest rate.”

(b) “The more debt the firm issues, the higher the interest rate it must pay. That is one important reason why firms should operate at conservative debt levels.”