Question: A firm increases its financial leverage when its ROA is greater than the cost of debt. Everything else equal this change will probably increase the

  1. A firm increases its financial leverage when its ROA is greater than the cost of debt. Everything else equal this change will probably increase the firm's _______. I. profit margin II. earnings variability over the business cycle since stock holder has lower priority than debt holder on earnings. III. ROE IV. stock price A. I and II only B. III and IV only C. I, III and IV only D. II and III only

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