Question: 1.True or false? MM's leverage irrelevance proposition says that... a. The cost of equity increases with financial leverage only when the risk of financial distress

1.True or false? MM's leverage irrelevance proposition says that... a. The cost of equity increases with financial leverage only when the risk of financial distress is high. b. As financial leverage increases, the value of the firm increases by just enough to affect the additional financial risk absorbed by equity. c. The value of the firm does not depend on the fraction of debt versus equity financing. d. If the firm pays no taxes, the weighted-average cost of capital does not depend on the debt ratio.

2.If the value of a levered firm is $5 million, what is the value of the same firm with all-equity financing?

A.$7 million
B.$6 million
C.$5 million
D.$4 million

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