Question: 6 . Debt Policy a . State and explain M&M ' s Proposition I. b . State and explain M&M ' s Proposition II .

6. Debt Policy
a. State and explain M&M's Proposition I.
b. State and explain M&M's Proposition II.
c. Briefly describe the traditionalists position on capital structure.
d. Draw a graph of return on equity and the return on debt as a function of leverage. Explain its shape.
e. Briefly explain the trade-off theory of capital structure.

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