Question: 1. True or False. Explain your answer within two sentences. ( 4 points each, 36 points total) a. Risk-free debt borrowing does not introduce any

1. True or False. Explain your answer within two sentences. ( 4 points each, 36 points total) a. Risk-free debt borrowing does not introduce any default risk and thus will not increase the expected return on equity. b. A firm should distribute cash to shareholders if the return on the cash holdings does not satisfy investors' expected rate of return. c. Issuing equity is costly because the firm value will be divided among a larger number of shares and thus the value of each individual share is reduced

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