Question: 2. The difference between the M&M theory Case I (no taxes no bankruptcy costs) and M&M Case II (taxes no bankruptcy costs) is A. The

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2. The difference between the M\&M theory Case I (no taxes no bankruptcy costs) and M\&M Case II (taxes no bankruptcy costs) is A. The relationship between cost of equity and leverage linear in Case I and non-linear in Case II B. Debt is more important according to Case I C. Case I does not consider the advantages of debt but Case II only considers the advantages of debt D. Case I has an optimal capital structure while Case II does not E. Cost of equity increases with cost of equity in Case I only

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